PACRA maintains 'AA' entity rating for Kohinoor Energy

March 25, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Kohinoor Energy Limited (PSX: KOHE) at "AA" for long term and "A1+" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

The ratings reflect the strong business profile of Kohinoor Energy, emanating from the demand risk coverage under the Power Purchase Agreement signed between Power Purchaser and the company.

Meanwhile, the Implementation Agreement provides a sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Kohinoor Energy continues to meet its availability and efficiency benchmarks, an outcome of technically sound O&M team, robust systems and controls.

During 6MFY24 under review three major maintenances occurred while during the corresponding HY of the previous FY no engine was overhauled.

During 6MFY24 Kohinoor Energy operated at 19.11% (6MFY23: 30.69%) capacity factor and delivered 104,642 MWh (6MFY23: 168,042 MWh) of electricity.

This decrease in generation is mainly attributed to the shift of electricity demand towards a less expensive source of generation i.e., Hydro, local coal, Solar, Wind, and Biogas from the power purchaser in the wake of a cost-effective energy basket.

The same trend is expected to be followed in upcoming periods. During 6MFY24 the top line of the company reported Rs5.15 billion (FY23: Rs12.58bn, 6MFY23: Rs7.04bn).

Despite the fall in revenue, margins benefitted from lower load factors, and appreciation of USD against PKR.

Gross and Net margins for 6MFY23 clocked to 20% & 14.7% respectively. Currently leveraging stood at 40% representing short-term borrowing only (FY23:15.6%).

There is adequate cushion available to the company to meet its working capital requirement in its approved STB limits.

The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in June 2008.

The ratings continue to take comfort from Kohinoor Energy's association with Saigol Group.

Although well-managed, in-house O&M activities expose the company to operational risk; thus, upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings.

Meanwhile, sustained profitability and performance levels will also remain critical.

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