Saif Power Limited
Saif Power Limited (PSX: SPWL) is a relatively new IPP, was incorporated on 11 November 2004 as a public limited company under the Companies Ordinance 1984 it is operating under the 2002 Power Policy, on a build, own and operate basis in Sahiwal District of Punjab.
The IPP is a 225MW combined cycle power plant; it is a subsidiary company of the Saif Group, a diversified industrial and services conglomerate in Pakistan with huge investments in power generation (Saif Power Ltd), oil and gas exploration (Saif Energy Ltd), real estate (Elite Estate Pvt. Ltd), textile (Saif Textile, Kohat Textile, Mediterranean Textile Company), bio fuel and organic compost (Lahore Compost Ltd), IT and communications (Softech Systems Ltd), and healthcare (Saif Healthcare Ltd).
As a combined cycle plant, the IPP uses natural gas as the primary source of fuel, and HSD as secondary source of fuel. The complex consists of 2 Gas Turbines from GE France and a Steam Turbine from Siemens Sweden. The plant commenced its operations on 30th April 2010 under a 30-year Power Purchase Agreement (PPA) with NTDC, a Gas Supply Agreement (GSA) with SSGC, and a Fuel Supply Agreement (FSA) with Shell. It can be seen from the illustration that the company’s fuel mix for power generation has moved from majority gas in 2016 to majority HSD in 2017.
Shareholding pattern
Majority of the shares at Saif Power Limited (51 percent) rest with the holding company of the group, Saif Holding Limited (SHL). Headquartered in Islamabad, Saif Holdings Limited (SHL) takes up the business development and investment activities of the Saif Group, and also provides consultancy and other related services to its associated companies. SHL also provides local support and other representative services to leading transnational corporations; it is also the third party sales representative in Pakistan for Motorola Inc. SHL is also the regional service provider in Pakistan, Afghanistan and Central Asian Republics for Iridium Communications Inc., which operates a system of active satellites used for worldwide voice and data communication from hand-held satellite phones and other units.
The other key shareholders include HBL with a share of over 7 percent, and Orastar Limited with a share of 19.3 percent. Orastar Limited is registered under the laws of British Virgin Islands, and its main activities include investments in cash, marketable securities as well as and private investments.
Company performance
2015 was an active year for power sector as CPEC was in full swing and power generation capacity additions on coal and renewable took the lead, while thermal generation capacity additions took a back seat. The then government was seen pushing for coal based power plants, RLNG based power plants, wind power plants, solar power plants and hydel power generation.
Saif Power Limited that runs on either gas or diesel saw its performance in 2015 slip. This came about due to underutilisation of capacity amid gas shortage in the country Utilisation on HSD increased significantly from 29 percent in 2011 to 56 percent in 2015, which escalated the cost of operations leading to higher O&M losses for the firm. And although, the diesel prices came down tremendously, the power purchaser still chose not to dispatch the full capacity. The firm was able to post earnings growth of 4 percent, year-on-year in 2015.
2016 was a better year in terms of dispatch of electricity for Saif Power due to the availability of LNG/gas. Dispatch was 58.79 percent for 2016 as compared to 50.85 percent in 2015. Out of this, LNG/natural gas accounted for 47.43 percent and HSD accounted for 11.36 percent. In terms of profitability, the company’s financial performance improved steadily with net margins improving from 6.4 percent in 2011 to 19.35 percent in 2016. However, turnover in 2016 was lower as dispatch was more on LNG/ gas, which is cheaper than diesel; Revenues were down by around 20 percent year-on-year 2016.
As per the annual account, Saif Power entered into an agreement with General Electric (GE) for digital industrial solutions for the plant, to power plant operators to gather sensor data from industrial machines and processes and turn it into actionable intelligence, and hence monitor equipment health, reduce downtime and improve reliability and performance
Saif Power’s operational performances in 2017 dropped significantly as dispatches during the year were 32.2 percent, versus 59 percent in 2016. Once again, the company’s share of expensive fuel, diesel in power generation increased where RLNG accounted for 5.98 percent and HSD accounted for 26.3 percent of the net output. Lower utilisation factors for the company came from the scheduled, major maintenance of steam turbine. After falling for two years, the company’s top line increased by three percent, year-on-year, though the total dispatched fell during the year. Earnings saw an improvement of 12 percent, year-on-year.
2018 and Beyond
2018 has been turned out to be better for Saif Power Limited so far. In 9MCY18, the IPP saw its revenues climb by 32 percent, year-on-year, and bottom line growth of 17 percent, year-on-year. But the company has long been facing the issues regarding its cash position: As per the latest quarterly report, an amount of Rs477.56 million related to capacity purchase price is not acknowledge by NTDC as the plant was not fully available for power generation, which according to the firm was due to non-availability of fuel owing to non-payment by NTDC itself. The arbitrator has awarded the amount in company’s favour along with related costs; Saif Power has filed a petition in Lahore High Court for its enforcement. However, NTDCL has also challenged it in Civil Court, Lahore.
The second is an amount of Rs239.68 million relating to capacity purchase price not acknowledged by NTDC. The sole reason for this quoted in the firm’s annual accounts was non-supply of gas by SNGPL. The arbitration award in SPWL’s favour for an amount of Rs.239.68 million against SNGPL was challenged by SNGPL in Lahore High Court (LHC), which was dismissed in the company’s favour.
The company had however, filed a petition last year in LHC to obtain decree in lieu of the arbitration award and adjusted the amount million against payables to SNGPL.
