PACRA Maintains Entity Ratings of Saif Power Limited

Saif Power Limited ("SPL" or "the Company") was established to set up and operate a combined-cycle, dual-fuel, 225 MW net power generation plant. The plant, which generates electricity for onward sale to the Power Purchaser (CPPA-G), achieved its commercial operations date (COD) on April 30, 2010. The Company’s strong business profile is underpinned by the demand risk coverage provided by a 30-year Power Purchase Agreement (PPA) with CPPA-G, which commenced from the COD. Additionally, the Implementation Agreement includes a sovereign guarantee for cash flows, contingent on adherence to agreed performance benchmarks, all of which the Company continues to meet. The plant’s Operations, Maintenance, and Service (O&M) are managed by General Electric International Inc. (G.E), a reputable entity with both local and international experience in the energy sector, offering added operational assurance. The plant primarily uses Gas/Regasified Liquefied Natural Gas (RLNG), supplied by Sui Northern Gas Pipelines Limited (SNGPL), with High-Speed Diesel (HSD) as a backup fuel. The supply risk for fuel is considered adequate, given the significant addition of RLNG to Pakistan’s fuel mix. In December 2024, the Board of SPL approved amendments to the PPA, the Implementation Agreement, and revisions to the tariff, in line with the recommendations of the Prime Minister of Pakistan’s Task Force. These amendments aim to transition the existing tariff structure to a "Hybrid Take and Pay" arrangement. Under the new amendments, the Task Force has aimed at reducing the Capacity Tariff of the plant by adjusting the tariff components. Furthermore, the Company has agreed to waive the outstanding interest on delayed payment charge to CPPA-G till October 31, 2024. For the nine-month period ending in CY24, SPL experienced a revenue decline of approximately 54%, with total revenue falling to PKR 8,146 million from PKR 17,602 million in the corresponding period of the previous year (CY23: PKR 19,044 million). However, the Company’s bottom line turned positive, reaching PKR 1,054 million compared to a loss of PKR 25 million in the prior period (CY23: PKR 336 million). SPL finances its working capital needs through a combination of short-term borrowings and internal cash flows. As of September 2024, the Company’s leverage stood at approximately 39%, a marked improvement from 51% at the close of CY23. Additionally, SPL successfully settled its project-related debt in March 2020.
SPL’s association with Saif Group and the successful operation of its plant, which consistently meets required performance benchmarks, are key factors supporting the assigned ratings. Although the proposed amendments to the PPA suggest a tariff discount, potentially affecting future cash flows. However, the government’s explicit guarantees for outstanding payments provide a degree of comfort. Moving forward, the ratings may remain vulnerable to any further amendments that could impact operations. Additionally, delays in receiving payments from the power purchaser may pose a concern. However, the management, supported by the sponsors, remains committed to maintaining improvements in the management of commercial obligations, as evidenced by the timely and full repayment of long-term debt.

About the Entity
SPL, established in 2004 as an Independent Power Producer, operates under the Power Policy 2002. The Company was listed on the PSX in December 2014. Saif Holdings Limited is the majority shareholder with a ~23% stake, followed by the sponsor family (~27%), Orastar Limited (~17%), and financial institutions (~15%). The seven-member Board of Directors (BoD), consists of five representatives from the sponsoring family and two independent directors. The Board is chaired by Mr. Javed Saifullah Khan, who succeeded Ms. Hoor Yousafzai, the former chairperson. Mr. Sohail H. Hydari, the CEO, has been with the Company since its inception.