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Pakistan Credit Rating Agency Limited Maintains Entity Ratings of Saif Power Limited

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by April 6, 2012 General

Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term and short term entity ratings of Saif Power Limited (SPL) at “AA-” (Double A minus) and “A1+” (A one plus), respectively. The ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings of SPL reflect its low risk profile, emanating from a cash flow stream guaranteed by the GoP under the Power Purchase Agreement (PPA), subject to adherence to agreed performance parameters.

The appointment of General Electric (GE), as the Operations and Maintenance (O and M) contractor makes it liable for any entity related liability on GE. However, given relatively new exposure to Pakistani IPPS industry, it would be challenging for GE. Nevertheless, upholding a strong governance structure along with effective monitoring of the plant operations by the management would ensure sustainability of operations on agreed parameters as per PPA. Meanwhile, the weak financial discipline of the sole customer, National Transmission and Despatch Company (NTDC), is the key challenge faced by the company.

The ratings are dependent upon the company’s ability to adhere to agreed upon performance parameters, as set by the power purchaser. Moreover, the availability of gas would remain important for efficient utilization of the gas based power plant. Meanwhile, managing liquidity requirements in the midst of the circular debt crisis and external factors such as any changes in the regulatory framework of IPPs remain critical to the ratings.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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