Press Release

VIS Reaffirms Entity Rating of Swat Expressway Planning Construction and Operation (Private) Limited

Karachi, August 04, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Swat Expressway Planning Construction and Operation (Private) Limited (SEPCO) at ‘A-/A-2’ (Single A Minus/Single A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned ratings is Stable. Previous ratings action was announced on July 12, 2021.

The assigned ratings take into account strong sponsor profile, as shareholding of the company is held by Frontier Works Organization (FWO) (Class A shares) and Pakhtunkhwa Highways Authority (PKHA) (Class B shares), both having extensive experience in infrastructure development projects, including public-private partnership and BOT mandates. The ratings also factor in presence of a Concession Agreement for a period of 25 years with the PKHA for construction, management, & maintenance of the Swat Expressway and FWO being responsible for Engineering, Procurement, and Construction (EPC) and Operations & Maintenance (O&M). Swat Expressway’s (SER) received substantial Completion certificate on September 30, 2020 from Independent Engineer (IE) which is the date when the Company started collecting operational toll rates. The Company received the completion certificate on March 31’ 2022 from IE.

The assigned ratings draws comfort in the fact that the revenue risk related to toll rates remains largely addressed. If PKHA or any other public sector entity decides to establish a competing route, then it will be ensured that the competing route shall be tolled at least equivalent to an amount 1.5 times higher than prevailing toll rates imposed at Swat Expressway. Otherwise, SEPCO would be entitled to receive losses in toll revenues from PKHA.

The assigned rating incorporates the debt re-profiling; subsequent to which majority (59%) of the debt is sponsor debt. The remaining is bridge-financing loan. The sponsor loans are subordinated to the bridge financing loan. Given sizable grace period on outstanding obligations and strong coverage of debt servicing on bridge financing, the financial risk profile is considered sound. The rating incorporates the assumption that the repayment on sponsor loan will remain delayed and will be made in accordance with the servicing capacity of the Company, subsequent to making the payment on the bridge financing loan.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext: 207) at 021-35311861-66 or email at .

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited