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The Pakistan Credit Rating Agency Limited

Date
22-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Hamza Ghalib
hamza.ghalib@pacra.com

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

  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Independent Power Producers (IPP) (May 17) [View]

Related Research

  • Sector Study | Power Generation (Mar 17) [View]
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PACRA Maintains Entity Ratings of Kohinoor Energy Limited
 Rating Type Entity
Current
(22-Dec-2017)
Previous
(23-Jun-2017)
 Action Maintain Maintain
 Long Term AA AA
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings of KEL reflect its stable business profile emanating from a secured regulatory structure. This entails sovereign guaranteed revenues and cashflows, given adherence to agreed performance benchmarks. KEL continues to meet its availability (88%) and efficiency (45%) benchmarks - an outcome of technically sound O&M team, robust systems and controls, and strong governance structure. Company’s efficiency gains are intact, increasing fuel prices bodes well with the bottom line. The management is also making efforts to squeeze its cost structure. Along with regular O&M, which is already taken care by KEL's own team, major maintenance has also been carried out by in-house O&M team. This has brought slight uptick to business margins reflected in better profitability during FY17. Meanwhile, the company continues to enjoy sound coverages. However, its financial profile is still highly dependent on the behavior of the power purchaser. 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 performance levels 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 of124MW), 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, CEO - Kohinoor Energy Limited, 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.
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