Verdict
Kohinoor Energy Limited’s FY2026 result is stronger at the bottom line than it is in cash. Higher dispatch lifted revenue sharply, and lower financing costs preserved a modest increase in profit after tax. But gross profit and operating profit fell, receivables more than doubled, operating cash flow turned negative and short-term borrowings almost doubled. The earnings number is therefore defensible; the quality of those earnings is the issue.
The annual result also sits inside a short strategic runway. The amended power-purchase agreement expires on November 27, 2027, and the final 161-day extension carries no capacity-payment claim. Management is seeking a further extension and exploring bilateral power sales, ancillary grid services and energy-storage manufacturing, but those routes remain contingent rather than bankable replacements for the existing contract.
Results at a glance
- Reporting basis: audited consolidated financial statements for the year ended June 30, 2026, in Pakistani rupees. The subsidiary is very small: consolidated profit after tax was PKR 743.64 million versus PKR 743.42 million on the standalone basis, while EPS was PKR 4.39 under both presentations.
- Revenue rose 46.8% to PKR 6.36 billion from PKR 4.33 billion, mainly because electricity dispatch increased 43.2% to 109,073 MWh from 76,156 MWh.
- Gross profit fell 13.9% to PKR 1.16 billion. Gross margin contracted to 18.2% from 31.1% because the dispatch-linked energy component expanded far faster than the fixed-capacity component.
- Consolidated operating profit fell 21.1% to PKR 850.13 million, and operating margin declined to 13.4% from 24.9%.
- Finance cost fell 69.3% to PKR 105.17 million from PKR 343.13 million. That reduction largely offset weaker operations, allowing profit after tax to rise 2.7% to PKR 743.64 million from PKR 723.86 million.
- Net cash used in operating activities was PKR 785.17 million, reversing PKR 2.25 billion of operating cash generated in FY2025. Trade receivables from CPPA-G rose to PKR 2.54 billion, including PKR 1.59 billion overdue.
- The board declared no cash dividend or bonus shares for FY2026, saying retained earnings would support the balance sheet and future investment.
What improved
The clearest operational improvement was dispatch. Electricity delivered increased by 32,917 MWh, while the capacity factor moved to 10.04% from 7.01%. The directors attributed the sales increase mainly to higher electricity dispatch. The plant also passed its annual dependable-capacity test at 128.37 MW, above its 124 MW contractual capacity, evidence that the 29-year-old asset can still perform when called.
That volume recovery explains the revenue mix. Net energy-purchase-price revenue more than doubled to PKR 4.78 billion from PKR 2.35 billion. By contrast, capacity-purchase-price revenue fell 17.9% to PKR 1.47 billion, and delayed-payment mark-up fell 44.4% to PKR 103.45 million. In other words, the headline sales rebound came from running the plant more, not from a broad improvement in every revenue stream.
Financing provided the main earnings cushion. Finance cost dropped by PKR 237.96 million as borrowing rates eased from the prior year’s much higher ranges, even though the closing short-term debt balance increased. Other expenses also fell to PKR 0.35 million on the consolidated basis from PKR 41.08 million, as the previous year included a PKR 40.19 million bad-debt write-off. Together, lower finance and other costs explain why profit before levy and tax edged up to PKR 744.96 million despite the decline in operating profit.
The tax line was not a major swing factor. Consolidated tax was PKR 0.46 million and the levy was PKR 0.86 million, reflecting the company’s disclosed tax treatment. EPS consequently rose to PKR 4.39 from PKR 4.27, matching the 2.7% rise in group profit.
What weakened / needs attention
Margins deteriorated sharply. Cost of sales rose 74.2% to PKR 5.20 billion, faster than revenue. Raw material consumed accounted for PKR 4.38 billion of the FY2026 cost base. That is consistent with a furnace-oil plant generating more energy: fuel-linked energy revenue and fuel expense both rise with dispatch, while the higher-margin capacity contribution was lower. The audited filing does not provide a clean price/volume/mix bridge beyond dispatch and tariff components, so it would be unsafe to attribute the margin change to fuel pricing alone.
Administrative expense increased to PKR 312.66 million on the consolidated basis from PKR 268.87 million. Combined with the weaker gross profit, this reduced operating profit by PKR 227.63 million. The net margin still fell to 11.7% from 16.7%, despite the financing relief.
Cash conversion is the most material weakness. Profit before working-capital changes was PKR 1.16 billion, but working-capital movements absorbed about PKR 1.82 billion. The largest item was a PKR 1.33 billion increase in trade debts. Consolidated operating cash flow therefore swung from positive PKR 2.25 billion to negative PKR 785.17 million.
The receivable build is concentrated in the sole customer. CPPA-G trade debts reached PKR 2.54 billion from PKR 1.21 billion; overdue amounts increased to PKR 1.59 billion from PKR 598.11 million. All overdue balances were within 180 days, and the receivables are backed by the Government of Pakistan guarantee under the implementation agreement. Even so, the auditor treated CPPA-G receivables as a key audit matter because delayed settlement affects liquidity and forces short-term financing.
That funding pressure is visible in the balance sheet. Short-term secured finance rose 94.9% to PKR 2.05 billion. Cash and bank balances fell to PKR 1.49 million from PKR 77.03 million, partly offset by PKR 500.15 million of short-term investments. Reported cash and cash equivalents after short-term finance were negative PKR 1.55 billion, compared with negative PKR 973.47 million a year earlier.
Current assets still exceeded current liabilities, but the current ratio softened to about 2.06 times from 2.16 times. This is not an immediate solvency signal; it is a collection-and-funding issue. The key question is how quickly CPPA-G pays and whether the company can reduce short-term borrowings without sacrificing operating readiness.
The PPA clock is now the defining strategic risk
The February 2025 amendment moved the contract to a hybrid take-and-pay structure effective November 1, 2024. It reduced parts of the indexed capacity tariff, limited future PKR/USD indexation on variable O&M, reset delayed-payment mark-up and settled past payables. The PPA now expires on November 27, 2027. The extra 161 days resolved disputed liquidated damages, but the company cannot claim capacity payments during that extension.
Management has requested another extension. It also points to the plant’s location near Lahore’s industrial load, quick synchronization and recent dispatch as reasons the asset may remain useful. Management is assessing bilateral sales under the competitive electricity market and a possible conversion that could provide synchronous-condenser and grid-stability services. These are credible options to investigate, but each depends on regulatory approvals, wheeling capacity, technical implementation and commercially viable terms. They should not yet be treated as replacement earnings.
A post-year-end memorandum of understanding with Hebei Juhang Energy Technology Group adds a separate diversification option. The non-binding proposal envisages lithium-ion battery-pack and energy-storage-system assembly, beginning at roughly 50–100 MWh of annual capacity and potentially expanding in phases. It requires due diligence, approvals and definitive agreements. It is an opportunity, not an FY2026 earnings driver.
Longer-run perspective
KOHE’s history shows how dispatch and contract structure dominate reported scale. Revenue fell from PKR 14.54 billion in FY2022 to PKR 4.33 billion in FY2025 as dispatch dropped, then recovered to PKR 6.36 billion in FY2026. Profit after tax was comparatively resilient at about PKR 1.5–1.6 billion in FY2022–FY2024 before dropping to PKR 724 million in FY2025 and recovering only modestly this year.
FY2026 therefore does not yet represent a return to the earlier earnings plateau. More dispatch improved sales, but the lower capacity contribution, thinner gross margin and weaker cash collection prevented a proportionate earnings recovery. The year is better described as an operational rebound accompanied by a funding squeeze.
AlphaGen model scores
These are AlphaGen model outputs, not figures reported by Kohinoor Energy Limited:
- Alpha QoQ Score: 71.35
- TTM Performance Score: 41.79
- 3Y Business Perf Score: 29.36
- Sector Leadership Score: 52.56
The combination is internally coherent: the latest-quarter signal is relatively positive because FY2026 finished with a strong dispatch and sales run-rate, while the weaker TTM and three-year readings reflect margin compression, lower profit than FY2022–FY2024 and the deterioration in cash conversion.
What to monitor next
- CPPA-G collections: repayment of the PKR 1.59 billion overdue balance is the most direct route to better cash flow and lower financing needs.
- Borrowing and finance cost: lower rates helped FY2026, but the debt base is much larger. The benefit can reverse if collections remain slow or rates rise.
- Dispatch economics: volumes alone are not enough. Track energy revenue, capacity revenue, gross margin and the plant’s utilization together.
- PPA extension: a binding outcome, tariff terms and whether capacity payments apply beyond November 2027 matter more than broad strategic statements.
- Alternative revenue: bilateral power contracts, ancillary-services conversion and the battery venture should be evaluated only when regulatory approvals, contracts, capital requirements and expected returns are disclosed.
- Dividend policy: the nil FY2026 payout preserves cash, but future distributions depend on collections, debt reduction and funding needed for diversification.
Evidence and limitations
The current-year income statement, balance sheet, cash flow, dispatch, receivables and PPA terms are supported by the audited annual filing. Quarterly operating cash flow and detailed quarterly operating KPIs were not available from the standardized history, so this analysis makes no claim about quarter-by-quarter cash conversion. The article uses audited annual cash flow and disclosed annual dispatch instead. No unreported split between fuel price, efficiency and tariff mix has been inferred.