PACRA Maintains Entity Ratings of Sapphire Electric Company Limited

Sapphire Electric Company Limited ("SECL" or the "Company") is a Public limited entity operating a dual-fired RLNG-based power plant. The financial stability of its sponsors, including the Sapphire Group—one of the country’s largest conglomerates with substantial experience in the energy sector—positively influences the Company’s ratings. Additionally, the Implementation Agreement offers a sovereign guarantee, conditional upon achieving specified performance benchmarks (Availability: 92.06%). The ratings also reflect low operational risk, supported by the reliable performance of General Electric as the operations and maintenance (O&M) operator. The plant's primary fuel, Regasified Liquefied Natural Gas (RLNG), is supplied by Sui Northern Gas Pipeline Limited (SNGPL) under a long-term contract, ensuring reliable availability and mitigating fuel supply risks.
During FY24, the Company generated approximately 479 GWh of electricity for the national grid (FY23: 452 GWh), reporting sales revenue of approximately PKR 20,082mln (FY23: PKR 18,968mln) and a net profit of PKR 2,783mln (FY23: PKR 3,207mln). The year-on-year decline in generation compared to the benchmark generation was primarily due to the power purchaser's transition toward renewable energy sources to optimize the energy mix. This shift resulted in reduced working capital requirements, mainly allocated for fuel procurement. The Company manages its working capital requirements through a mix of internal cash generation and secured working capital facilities, of approx. PKR 12,544mln. As of FY24’s close, the average utilization of this facility stood at 8%, reflecting reduced demand.
The project-related debt for Sapphire Electric was fully repaid by September 2020, and the Company has no other long-term debt on its balance sheet, maintaining a strong equity base. However, this equity base may face dilution due to planned capital expenditures for Sapphire Hydro Limited, a wholly owned subsidiary developing a 150 MW hydropower project in Sharmai, Khyber Pakhtunkhwa. Financial closure for this project is expected in FY26, subject to the issuance of a Letter of Support from the authorities.
Maintaining sound financial discipline and upholding strong operational performance in line with agreed benchmarks remain critical. Additionally, recent developments in Pakistan's power sector indicate that the Government of Pakistan (GoP) has initiated negotiations with Independent Power Producers (IPPs) to consider potential adjustments to existing contractual arrangements. The specifics and outcomes of these discussions are yet to be determined, and any changes to the current regulatory framework could influence the Company’s ratings in the future.

About the Entity
Sapphire Electric was established in 2005 as an independent power producer (IPP) with a gross capacity of 225 MW, operating under the Power Policy 2002, and commenced commercial operations in October 2010. It is a subsidiary of Sapphire Fibres Limited, with the Sapphire Group holding a 70% ownership stake, primarily through Sapphire Fibres Limited. The remaining shares are distributed among Xenel Saudi Arabia (20%), Meezan Bank (5%), and a group of high-net-worth individuals (5%). The project was financed with a capital structure comprising 25% equity and 75% debt. The Company’s governance is overseen by a seven-member Board of Directors, including the CEO, predominantly comprising representatives from the Sapphire Group, alongside one representative from Xenel. The Board plays a pivotal role in setting company's strategic direction and making key decisions. Mr. Shahid Abdullah, the CEO, also leads the parent company, Sapphire Fibres Limited, and is supported by a highly skilled management team.