The Pakistan Credit Rating Agency Limited
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Hamza Ghalib

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PACRA Maintains Entity Ratings of Saif Power Limited

Rating Type Entity
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Saif Power Limited (Saif Power) runs 225MW Combined Cycle Thermal Power Plant at Sahiwal. The ratings reflect the strong business profile of Saif Power emanating from the demand risk covered under PPA signed between NTDC and the company. The implementation agreement further provides a sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of established performance credentials of GE - the O&M operator. The company produced ~99% of the electricity through gas during CY18. Saif Power’s receivables continue to remain dependent on power purchaser – NTDC – payment behavior. Howbeit, delayed payments from the power purchaser remained a challenge. Nevertheless, the company has been managing its working capital requirements through a mix of internal cash generation and short-term borrowings. Short term borrowing lines are available and mainly used to fund any shortfall in working capital requirements. Wherein remaining cushion in the available working capital facilities is ~52%. Saif Power is paying dividend to its shareholders and intends to continue this pattern in the future. The company's association with Saif Group provides comfort to the ratings.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. The Company's repayment behavior with its financial profile remains important. Meanwhile, any significant increase in overdue receivables may impact the ratings.

About the Entity
Saif Power, established in 2004, is an Independent Power Producer operating under the Power Policy 2002. SPL is operating a Combined Cycle thermal power plant on build-own-operate (BOO) basis with a gross capacity of 225 MW. Saif Power's plant commenced operations on April 30, 2010. Saif Power was listed on Pakistan Stock Exchange in December 2014. Saif Holdings Limited, with ~51% stake, is the majority shareholder of the company followed by Orastar Limited (~17%), and Habib Bank Limited (~4%).

The project capital structure comprises 24% equity and 76% debt. Project related debt was PKR 12,907mln. The tenor of the debt was 10 years with Forty (40) consecutive quarterly payments, started from Jun-2010 (entire debt will be settled by Mar-2020). Mark-up rate on the borrowed amount is 3-month KIBOR + 3%. By the end- Dec18, ~PKR 9,932mln has been paid off, while total principal outstanding is ~PKR 2,975mln.

The seven-member Board of Directors (BoD), excluding CEO, comprises six representatives of the sponsoring family and one independent director. Nominees of Saif Group are experienced professionals. Ms. Hoor Yousafzai chairs the board. The Chief Executive Officer, Mr. Sohail H Hydari, had been associated with the company since inception. He is assisted by an experienced team.

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.