PACRA Assigns Preliminary Ratings to Reon Energy Limited - PPSTS - PKR 500mln – TBI

The ratings reflect Reon Energy Limited’s (“Reon” or “the Company”) strong position in smart energy solutions, specializing in renewable microgrids for energy-intensive industries. Operating under an EPC model, Reon offerings also include REFLEX™ (lithium-ion battery platform), SPARK™ (energy management system), and Asset Performance Management for efficiency and lifecycle optimization of solar assets. The Company’s revenues are primarily driven by the Commercial & Industrial and Telecom sectors, reinforced through collaborations with leading business groups. In CY24, revenues grew decently, accompanied by higher gross margins and improved profitability. This positive trajectory has continued into 1HFY25, with performance trends broadly in line with the previous year. The equity base is strengthened in FY24, while working capital requirements were largely met through internal cash generation, with minimal reliance on short-term borrowings—reflecting a sound financial profile. To further support liquidity, the Company is planning to raise funds through a rated, privately placed, secured short-term Sukuk of approx. PKR 500mln, inclusive of a PKR 100mln green shoe option. The Sukuk will serve as a bridge-financing arrangement, aimed at meeting project milestones and realizing revenues in line with agreed contractual terms, while also diversifying funding sources. Repayment is expected to remain comfortably supported through project-related receivables. PACRA has assessed cash flows of ~PKR 6.7bln over the tenor, comprising few portion from in-hand projects; while these provide a repayment cushion, it is further strengthened by newly signed projects, ensuring smoother debt servicing, providing ~2x coverage at maturity.. The projects are diversified across solar, wind, and battery storage, as well as by customer base, including conglomerates, foreign project, and EPC contracts. To ensure repayment discipline, a Debt Payment Account (DPA) has been established, which will be activated in the last three months of the Sukuk’s tenor. Under irrevocable instructions, the Company will deposit 30%, 30%, and 40% of the total obligation (principal plus markup) in each respective month, ensuring the DPA is fully funded by maturity. In addition, post-dated cheques in favor of the Sukuk holders will be provided to the MLA. Furthermore, a working capital facility of PKR 500mln has also been arranged and can serve as a back-up source for debt repayment if required. Alongside this, a letter of support from RMH—Reon’s parent company with significant international presence—will cover any potential shortfall on a pre-default basis, thereby further strengthening payment security.
The timely realization of cash flows from existing and newly awarded projects, along with strict adherence to the repayment schedule, remain key considerations for the assigned ratings.

About the Entity
Incorporated in 2014, the Company develops renewable energy projects for commercial and industrial clients. Following the divestment by Dawood Lawrencepur Limited, the Company became a wholly owned subsidiary of RMH International DMCC in October 2024. It is led by CEO Mujtaba Haider Khan,

About the Instrument
The Company is issuing a Rated, Privately Placed, Secured Short-Term Sukuk of up to PKR 500mln (including a PKR 100mln green shoe option) for six months to bridge financing gaps in ongoing projects. The Sukuk carries a tentative profit rate of 3MK + 175 bps, with profit serviced quarterly and principal repaid in a bullet at maturity. The instrument is backed by multiple credit enhancements in favor of the Investment Agent, acting for Sukuk holders: (i) a first-ranking charge over PKR 650mln trade receivables (maintained 25% above outstanding principal); (ii) a DPA under lien of the Investment Agent; (iii) post-dated cheques in favor of Sukuk holders; and (iv) a letter of support from RMH International DMCC, the parent entity.