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Lahore, September 27, 2019 (PPI-OT): The ratings of Kohinoor Energy Limited (Kohinoor Energy) 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. Kohinoor Energy continues to meet its availability (86.07%) and efficiency (43.5%) benchmarks – an outcome of technically sound O and M team, robust systems and controls, and strong governance structure.
Nevertheless, delayed payments from the power purchaser remained a challenge. Business risk is considered low exhibited by demand risk coverage under the Power Purchase Agreement signed between WAPDA and the company. Current borrowings mainly short-term reflects the need to meet the working capital requirements and maintenance projects. Short-term borrowing lines are available and mainly used to fund any shortfall in working capital requirement. There is cushion available in short term lines.
Given the liquidity situation, utilization is imputed to go up. Settlement of overdue receivables is crucial. Meanwhile, the company continues to enjoy sound coverages, though its financial profile is highly dependent on the timely repayment of the receivables. The Company has been paying dividends which in times of need is an internal source of liquidity available. The ratings continue to take comfort from Kohinoor Energy’s association with good business groups – Toyota Tsusho Corporation and Saigol Group.
Although well-managed, in-house O and 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.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com