Rahim Yar Khan: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its entity ratings for Etihad Alloys (Pvt.) Limited at BBB- for long-term and A3 for short-term, with a developing outlook as the company undertakes significant expansion in steel and power generation sectors.
According to The Pakistan Credit Rating Agency Limited announcement issued on 01 November 2024, Etihad Alloys, under the Etihad Group, is progressing on a new steel industrial unit located adjacent to its existing sugar mill in Rahim Yar Khan, Punjab. This facility, currently under construction, aims to produce steel billets with an annual capacity of 250,000 MT. The project is being funded through a 65:35 debt-to-equity ratio but has encountered delays in acquiring “Sole Enterprise Special Economic Zone” status due to restrictions from the IMF’s Extended Finance Facility.
Further, the company has integrated Etihad Power Generation Limited into its operations following a merger approved by the Lahore High Court effective July 1, 2023. This integration is expected to bolster financial efficiencies by leveraging in-house renewable energy from a newly established 37.2 MW bagasse-based power plant, reducing overall production costs. The total cost for this power project is set at PKR 9,745 million, funded by a 60:40 debt-to-equity ratio, with financial closure achieved through a PKR 5,850 million syndicated term finance facility as of August 5, 2024.
EAPL’s current total debt stands at PKR 2,566 million, anticipated to increase as funding for the power project is drawn down. The company has also demonstrated financial discipline by repaying seven quarterly installments totaling approximately PKR 1.2 billion since March 2023, supported by sponsor’s subordinated loans. EAPL maintains a Debt Service Reserve Account to cover three months of financial obligations until maturity.
The completion and commercial operation of both the steel and power projects, expected by October 2025, are critical to the company’s future financial stability, with the successful management of these projects being crucial to maintaining the current ratings.