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Saif Power Limited (PSX: SPWL) is a relatively new IPP, operating under the 2002 Power Policy on build, own and operate basis in Sahiwal District of Punjab.

It is a subsidiary company of the Saif Group, a diversified industrial and services conglomerate in Pakistan with 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). It was incorporated on 11 November 2004 as a public limited company under the Companies Ordinance 1984.

Saif Power Limited has a combined cycle thermal power plant with a gross capacity of 225 MW. The plant consists of 2 gas turbines from GE France and a steam turbine from Siemens Sweden. The plant uses natural gas as the primary source of fuel, and HSD as secondary source of fuel. 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.

Shareholding pattern Majority of the shares at Saif Power Limited (51 percent) rest with Saif Holding Limited (SHL), which is responsible for 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.

Another key shareholder holding over 17 percent of the company's share is a foreign company Orastar Limited, and according to the internet, the company is under the laws of British Virgin Islands. The main activity of the company is investments with a wide-ranging portfolio. Over 15 percent of the shares are held by the banks, DFIs and NBFIs, and over 5 percent rest with the general public.

SPWL Performance 2015-2018 The year 2015 was filled with significant activity in the power sector, largely in the coal and renewable segment. The government was seen pushing for coal based power plants, RLNG based power plants, wind power plants, solar power plants and hydel power generation. During the year, Saif Power Limited that is a thermal power plant saw its operational performance slip due to underutilised capacity amid shortage of gas. Utilisation on HSD - the secondary fuel - 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. In 2015, the company's top-line declined by 19 percent year-on-year as dispatch was more on LNG/natural gas which has a substantially cheaper price than HSD. However, the earnings improved by 3 percent year-on-year due to better gross margins and lower finance cost.

2016 was better 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 80.7 percent and HSD accounted for 19.3 percent in the total net generation. In 2016, Saif Power's turnover was lower by 20 percent year-on-year primarily due to the same reason of higher dispatch on LNG. The bottom-line however continued to improve steadily due to lower finance cost.

In 2017, the firm saw its revenues improve by around 2.6 percent year-on-year, which was due to significantly higher dispatches on high speed diesel, which is expensive than LNG/ natural gas. Thought dispatch was 32.30 percent for the year as compared to 59 percent in 2016, Once again, the company's share of expensive fuel, diesel in total output increased to 81.5 percent, where RLNG accounted for 18.5 percent of the net output. The plant's availability factor was lower at 81.67 percent as against 93.50 percent in 2016 due to scheduled, major maintenance of steam turbine in 2017. Growth in top-line along with lower finance cost resulted in 12 percent year-on-year growth in the company's bottom-line.

In 2018, Saif Power Limited's fuel composition flipped; share of gas in shape of RLNG increased to 99.7 percent against negligible HSD share. The company dispatch level doubled from 32.2 percent in CY17 to 61.92 percent in CY18; improvement in utilisation levels came from low base of dispatched electricity in CY17 due to repair and maintenance of the steam turbine. The plant availability also improved from 81.7 percent in 2017 to 94.5 percent in 2018.

The revenues for the company depicted growth of 36 percent, year-on-year due to increase in dispatches as well as the dollar indexation. This also affected the bottom-line positively, which increased by 17 percent year-on-year. While the growth in finance cost restricted the improvement in the bottom-line, lower administrative expenses lifted the earnings for 2018, which were elevated in the previous year due to scheduled maintenance. During the year, long-term equity investment was made in Saif Cement (Private) Limited. According to the annual report, the equity investment is worth Rs 631 million that represents 63,100,000 fully paid ordinary shares of Rs 10 each. Saif Cement (Private) Limited has planned to set up a cement manufacturing plant in Khyber Pakhtunkhwa.

Outlook Saif Power has seen a moderate growth in earnings over the years. Though the revenues have seen a decline in the first nine months of 2019, the company's earnings witnessed an increase of 17 percent year-on-year due to lower cost of sales, and hence improvement in gross profits.

A key receivable issue for Saif Power for long has been an amount of Rs 239.68 million relating to capacity purchase price not acknowledge by NTDC. The 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 however, filed a petition in LHC to obtain decree in lieu of the arbitration award and adjusted against payables to SNGPL. SNGPL has filed suit for recovery against this adjustment including a claim for a mark-up from the date of such adjustment. However, as per the company, no amount is payable to SNGPL.

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Saif Power Limited-Shareholdings as on 31 Dec, 2018
===================================================
Category of shareholder                  Percentage
===================================================
SPONSORS, DIRECTORS, CEO AND CHILDREN        0.0032
ASSOCIATED COMPANIES                         51.045
Saif Holding Limited                         51.045
Saif Textile Mills Limited                    0.000
BANKS, DFI AND NBFI                          15.776
INSURANCE COMPANIES                           1.615
MODARABAS AND MUTUAL FUND                     3.463
GENERAL PUBLIC (LOCAL)                        5.129
GENERAL PUBLIC (FOREIGN)                      0.607
OTHERS                                        2.507
FOREIGN COMPANIES                            19.855
ORASTAR LIMITED                              17.083
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Total                                           100
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Source: Company accounts

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Saif Power Limited
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Rs(mn)                                    9MCY19     9MCY18      YoY
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Turnover-net                              13,284     14,403      -8%
Cost of sales                              9,530     11,383     -16%
Gross Profit                               3,754      3,020      24%
Administrative expenses                      119        110       9%
Finance cost                                 937        606      55%
Other income                                   2          2     -19%
Profit for the period                      2,700      2,306      17%
Earnings per share- basic and diluted       6.99       5.97      17%
Gross margins                             28.26%     20.97%
Net margins                               20.32%     16.01%
====================================================================

Source: Company Accounts

Copyright Business Recorder, 2020

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