Final PR
The Pakistan Credit Rating Agency Limited

Jhangeer Hanif

Sehar Fatima

Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]

Related Research

  • Sector Study | Road Infrastructure | Tolling (Mar 17) [View]
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PACRA Assigns Entity Ratings to Motorway Operations and Rehabilitation Engineering (Private) Limited (MORE)
 Rating Type Entity
 Action. Initial
 Long Term AA-
 Short Term A1
 Outlook Stable
 Rating Watch -

MORE - a wholly owned subsidiary of Frontier Works Organization (FWO) - is specifically established for overlay and modernization of Lahore-Islamabad Motorway (M-2). The project is assigned by National Highway Authority on a Build-Operate-Transfer (BOT) basis for 20 years (beginning Apr-14). The construction phase comprised initial two years encompassing overlay and major rehabilitation work. Benefiting from technical expertise of FWO, the company has successfully achieved construction completion in Aug-16, ahead of projected timeline. O&M contract is also outsourced to FWO, having successful track record. This along with independent quality control mechanism vetted by Joint Auditor and Quality Assurance Inspector are positives. The ratings recognize i) strong revenues, since CoD, mainly emanating from robust traffic volume ii) toll revenues subject to annual rate increase guaranteed by NHA, iii) good build-up of revenues from ancillary services. Financial risk is expected to be adequately managed with net cumulative cashflows providing good debt service coverage. Although there is no explicit commitment; FWO having strong financial muscle, is likely to provide support in case need arises. Additionally, debt repayments are ensured through gradual buildup of reserves.

The ratings are dependent on the realization of projected cash flows. Meanwhile, any material reduction in traffic volumes thereby impacting overall revenues and related cashflows will have negative rating implication.

About the Entity
Motorway Operations & Rehabilitation Engineering (Private) Limited (MORE) was incorporated on April 11, 2014. MORE’s six members BoD comprises three serving Army officers and two civilian directors. The Chief Operating Officer - Brig. Shamim Akram (Retd.) (Sitara-I-Imtiaz, Military) is the key person involved in the management and operational aspects of the project.

About The Project

The Project, covered by ‘concession agreement’ signed between MORE and NHA, encompasses three distinct phases; 1) Initial (Apr-Dec14), 2) Construction (Dec14-Aug16), and 3) Operation (Sep16-Apr34). Project has completed construction phase with major rehabilitation works ahead of planned timeline (Jan17).
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.