Kohinoor Energy Limited

Incorporated in April 1994, Kohinoor energy Limited is one of the pioneer projects of independent power producers in Pakistan. The independent power producer (IPP) is situated at Link Manga Raiwind Road, in Lahore; it owns a 1311.4MW gross capacity furnace oil-based power plant. Its net capacity is 124MW, and its only customer is Water and Power Development Authority (WAPDA).
With a paid-up capital of Rs 1.695 billion, it is a joint venture of the Saigols Group of Companies - a well-known multi-industrial group of Pakistan, and Toyota Tsusho Corporation- a renowned consortium of multi-industrial activity of Japan.
FINANCIAL PERFORMANCE FY14 Kohinoor Energy witnessed a significant increase in the electricity it dispatched in FY14. It achieved a dispatch level of 81.9 percent in FY14 compared to 6.7 percent in FY13, which corresponds to 890 Gigawatt hours of electricity in FY14 from 725 Gigawatt hours in FY13. This heightened dispatch level was the main reason behind the spur in top line. The IPP's revenues escalated by 23 percent, year-on-year, in FY14.
Also, FY14 was fuelled by higher fuel savings for KOHE. These fuel savings emanated from better plant utilisation and efficiency. And this has been the prime reason for the continued growth in Kohinoor Energy's earnings for the overall performance of the company in FY14.
While the gross margins and operating margins dipped slightly on account of growth in administrative expenses, cost of sales and contraction in other income, net margins for the year increased marginally to 15percent year-on-year decline in finance cost. Also during the year, six engines reaching at 84,000 operational hours have been overhauled in line with the firm's maintenance program.
FINANCIAL PERFORMANCE 9MFY15 KOHE started off FY15 with a moderately higher dispatched electricity of 229 Gigawatt hours WAPDA, and moderately growth in revenues (ie four percent year-on-year in 1QFY15) However, the net earnings for the period fell by 10 percent year-on-year mainly due to the maintenance of two engines as compared with no major maintenance work occurring in 1QFY14. During the quarter, fuel savings also remained stagnant. The decrease in furnace oil prices were balanced by increase in facility efficiency and higher utilisation level of 84 percent.
In 1HFY15, KOHE' earning were pulled down by oil prices, effecting its fuel savings. Despite higher plant utilisation of around 80 percent during the 2QFY15, the continued fall in crude oil prices had an adverse impact on the fuel savings for the independent power producer.
KOHE's revenues slipped by1.2 percent year-on-year in 1HFY15. The bottom line took a 15 percent year-on-year dip, and besides the shrink in fuel savings, the firm's earnings were also weighed down by rising finance cost: where the increase in finance cost in 1HFY15 was more than 65 percent year-on-year, the same grew by 36 percent year-on-year in the second quarter of FY15 alone.
During the 3QFY15, the power company operated at 74.31 percent capacity factor and delivered 199,033MWh of electricity to WAPDA- its key client. This was lower as compared to previous year when the firm in 3QFY14 operated at 85.92 percent capacity factor and dispatched 230,131MWh of power to WAPDA.
Overall, the turnover for nine months of FY15 stood at Rs 9.13 billion, which is 18 percent year-on-year lower than that of 9MFY14. Similarly, earnings also plunged by 26 percent year-on-year for 9MFY15 to Rs 631 million. The main reason as highlighted by the firm in its Director's Report for the period is the cut in fuel savings along with higher spending on major maintenance work for the firm. As per the report, in 3QFY15, two engines went through the 8-k hours maintenance while during the previous corresponding quarter the major maintenance cost equivalent to one and a half engines maintenance work was charged to the profit and loss account.
OUTLOOK The biggest threat for the firm right now is the mounting receivables of the power sector resulting in the circular. Already the firm has witnessed restricted fuel savings on account of falling crude oil prices, which may take a breather in the last quarter as oil prices have started rising now.

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Kohinoor Energy Limited

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                               FY11      FY12       FY13      FY14     9MFY15

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Profitability

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Gross margin                   8.18%    10.72%     11.24%    10.56%    11.54%

Operating margin               6.41%     9.16%      9.54%     8.92%     9.34%

Net margin                     5.77%     6.99%      7.00%     7.14%     6.92%

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Liquidity and activity

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Current ratio                  2.65      2.19       6.43      1.68       2.07

Return on assets                7.0%      8.0%     11.0%      10.0%      7.4%

Return on equity                8.7%     11.3%     11.8%      16.4%      9.9%

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