March 24, 2022: The ratings reflect the strong business profile of Saif Power Limited (Saif Power) emanating from the demand risk coverage under the Power Purchase Agreement signed between the Central Power Purchasing Agency (CPPA-G) and the company.
Meanwhile, the Implementation Agreement provides a sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Saif Power continues to meet its availability (88%) and other performance benchmarks. Fuel supply risk is considered low 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.
The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in March-2020. As a result of the revision in agreement with CPPA-G, the Company’s profitability indicators will be slightly lower going forward. Short-term borrowing lines are available and mainly used to fund any shortfall in working capital requirements. There is ample cushion available in short-term lines.
Given the liquidity situation, the company managed to sustain the utilization at 52%. Settlement of overdue receivables is crucial. As a key point of MOU with GOP, Saif Power received the first instalment of 40% of pending receivables from the off-taker.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. However, the management remains committed to sustain improvement in management of commercial obligations reflected by the timely and fully repayment of long debt.
