Press Release

VIS Reaffirms Entity Ratings of Swat Expressway Planning Construction and Operation (Pvt.) Limited

Karachi, December 05, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Swat Expressway Planning Construction and operations (Private) Limited (‘SEPCO’ or ‘the Company’) at ‘A-/A2’ (Single A Minus/A Two). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A2’ denotes good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on October 06, 2023.

SEPCO is a Special Purpose Company (SPC), jointly owned by Frontier Works Organization (FWO) and Pakhtunkhwa Highways Authority (PKHA), both having extensive experience in infrastructure development projects, including public-private partnership (PPP) and Build Operate and Transfer (BOT) mandates. The Company entered into a 25-year concession agreement with the PKHA for construction, management, maintenance & operations of the Swat Expressway (SER) on 17th October, 2016. SER project comprises 4-lane 81-km long controlled-access motorway starting from Kernal Sher Khan (KSK) interchange at M-1 near Nowshera up to Chakdara Interchange in lower Dir district.

The assigned ratings consider the mitigation of the business risk profile, as the revenue risk associated with toll rates is largely addressed. The traffic profile suggests that the majority of travel will be driven by tourism and commuter-related purposes. Significant time savings are anticipated along the SER compared to competing routes, which experience longer travel times due to greater distances and challenging terrain. The concession agreement protects SER toll collection from new competing routes by way of setting higher toll rates of new route(s) or payment of compensation to SEPCO for any resulting toll revenue losses. Furthermore, the yearly upward adjustment in toll rates, as outlined in the concession agreement, mitigates the revenue risk to some extent.

The assigned ratings also incorporate SEPCO's debt servicing capacity on the NBP syndicated term finance facility. As of June 2024, the majority (~72%) of the debt comprises sponsor loans, while the remainder is a syndicated term financing facility (STFF) loan from NBP. The sponsor loans are subordinated to the NBP loan, with a support agreement in place to cover any shortfalls in debt servicing, operational expenses, or related costs to ensure business continuity until the facility is fully adjusted. The rating assumes that sponsor loan repayments will remain deferred and will align with the Company’s debt servicing capacity, prioritizing repayment of the NBP STFF.

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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .