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PACRA Maintains Entity Ratings of Saif Power Limited

Rating Type Entity
(30-Mar-21 )
(30-Mar-20 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Saif Power Limited (Saif Power) is a 225MW Combined Cycle Thermal Power Plant at Sahiwal. The ratings reflect the strong business fundamentals of Saif Power emanating from the demand risk covered under PPA signed between NTDC and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Nevertheless, delayed payments from the power purchaser remains a challenge. 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 9MCY20. Fuel supply risk is considered adequate as they procure RLNG from SNGPL with good credit terms. Moreover, the company has arrangement in place to procure High-Speed Diesel (HSD), the backup fuel, from Shell Pakistan. Short-term borrowing lines are available and mainly used to fund any short-fall in working capital requirements. There is ample cushion available in short-term lines. Given the liquidity situation, utilization is imputed to go up. Settlement of overdue receivables is crucial. The long-term debt of the company is fully paid successfully in March-2020. The Company's financial risk profile is dependent on the timely receipt of receivables from the power purchaser. Saif Power, has recently signed the agreement in pursuant to MoU which will improve the liquidity in future, upon receipt of 40% of trade receivables, as first installment, in the form of cash, PIBs and instrument rest 60% will be paid after 6 months of receipt of first installment. Further, ROE is reduced to 12% for foreign equity investment and for local investors ROE will be changed to 17% per annum in PKR. In actual the impact of executed agreement is yet to be seen. Sound financial profile of Saif Group, the major sponsor, provides comfort to the ratings.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. Any significant increase in overdue receivables, as a result of rise in circular debt, may impact the ratings.

About the Entity
Saif Power, established in 2004, as Independent Power Producer is operating under the Power Policy 2002. It is 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 seven-member Board of Directors (BoD), excluding CEO, comprises five representatives of the sponsoring family and two independent directors. Nominees of Saif Group are experienced professionals. Mrs. Hoor Yousafzai chairs the board. The Chief Executive Officer, Mr. Sohail H Hydari, has 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.