Press Release
VIS Reaffirms Entity Ratings of Malir Expressway Limited.
Karachi, November 20, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Malir Expressway Limited ('MEL' or ‘Company') at ‘A-/A2’ (Single A Minus/A Two). Medium to long term rating of ‘A-’ indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable.’ Previous rating action was announced on October 12, 2023.
MEL is an unlisted public limited company established on March 22, 2020, under the regulations of the Companies Act, 2017. It was set up with the primary objective of constructing the Malir Expressway (ME), a six-lane dual carriageway that runs alongside the Malir Riverbed, spanning approximately 38.75 kilometers. In April 2020, the Company entered into a 25-year long Concession Agreement with the Government of Sindh (GoS).
ME project is a major infrastructure initiative in Karachi currently under development, connecting the Jam Sadiq Bridge to the Kathore Bridge. Developed through a Public-Private Partnership (PPP) arrangement and following the Design-Build-Finance-Operate-Transfer (DFBOT) model, the project aims to improve traffic flow, reduce travel time, and enhance connectivity in the region. The project successfully achieved financial closure on May 10, 2022, and initiated construction on May 12, 2022. Phase-01 of the project, which covers construction of the expressway up to Quaidabad interchange, is expected to be operational by the end of 2024. However, Phase 2, which covers rest of the construction, experienced a scope change in February 2024, leading to design modifications that caused further delays. Management now anticipates its completion by June 2025. The cost increase resulting from change in project scope is being funded by the GoS.
The ratings reflect the sound profile and satisfactory track record of MEL’s shareholders, which include JN & Co., Habib Construction Services, Niaz Muhammad Khan & Brothers and the Government of Sindh. With funding support from the GoS and a well-defined contractual structure, the project is well-protected against implementation and operational risks. Key agreements including the EPC contract, under which experienced contractors are committed to completing the project on time, and the Concession Agreement provides commitment from the GoS to cover cost overruns during the construction phase and meet revenue shortfall during operational phase. Provisions for performance securities ensure adherence to quality and operational standards. Additionally, toll rate escalation and a cost-adjustment mechanism by GoS enhance financial stability going forward. The ratings are dependent upon timely completion of the project, availability of financing and GoS’s and the sponsor’s support as built in the Concession Agreement.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Toll Roads
https://docs.vis.com.pk/docs/TollRoads_2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf
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