Final PR
logo
The Pakistan Credit Rating Agency Limited

Date
31-Oct-2016
Analysts
Aisha Khalid
aisha@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Methodology | Independent Power Producers (IPP) (Jun 16) [View]

Related Research

  • Sector Study | Independent Power Producers (Feb 16) [View]
Disclaimer
This press release is being
transmitted for the sole purpose of
dissemination through print/electronic
media. The press release may be used
in full or in part without changing the
meaning or context thereof with
due credit to PACRA
PACRA Maintains Entity Ratings of Kohinoor Energy Limited
 Rating Type Entity
Current
(31-Oct-2016)
 Action Maintain
 Long Term AA
 Short Term A1+
 Outlook Stable
 Rating Watch -

The ratings of KEL reflect its stable business profile emanating from a secured regulatory structure. This entails sovereign guaranteed revenues and cash flows, given adherence to agreed performance benchmarks. The ratings incorporate KEL's strong operational performance as reflected by efficiency (45.2%) and availability (89%) measures - an outcome of technically sound O&M team, robust systems and controls, and strong governance structure. The company has experienced continuous decline in its bottom-line, a factor of lower oil prices that is limiting the monetary translation of efficiency gains. Thus the management is making efforts to squeeze its cost structure. Along with regular O&M, which is already taken care by KEL's own team, major maintenance work would also be performed by in-house team going forward. This is expected to bring slight breather to business margins. Meanwhile, the company continues to enjoy sound coverages. However, its financial profile is still highly dependent on the behavior of the power purchaser. Despite rising increasing receivable days the company managed to sustain its financial strength. The ratings continue to take comfort from KEL's association with strong business conglomerates - Toyota Tsusho Corporation and 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 parameters would remain a key driver of the ratings. Meanwhile, any significant accumulation in receivables, thereby impacting the financial profile of the company may have negative effects.
About the Entity
KEL - an independent power producer (IPP) – commissioned its plant under Power Policy 1994. With a total cost of US$ 138.8mln and capacity of ~131MW (Dependable capacity of 124MW), the company started its Commercial Operations in June 1997. KEL is listed on Pakistan stock exchange.

The principal sponsors of the company are Toyota Tsusho Coporation (TTC) (36%), followed by the Saigol Group (26%). The remaining shareholding (~38%) is widely dispersed. The board includes four representatives of TTC, two representatives of the Saigol group and one representative of Wartsila Pakistan. The chairman, Mr. Naseem Saigol is a renowned businessman. He also chairs the Board of PEL, an established appliances company.

Mr. S.M Shakeel, appointed as CEO in April 2016, has a long association with KEL and previously worked as Chief Operating Officer. Mr. Shakeel is a Chartered Accountant by profession and assisted by a team of qualified individuals with significant experience in the energy business.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
Print