PACRA Maintains Entity Ratings of Etihad Alloys (Pvt.) Limited

Etihad Group is set to establish a new steel industrial unit, under the corporate umbrella of Etihad Alloys (Pvt.) Limited ("EAPL" or "the Company"), in Rahim Yar Khan, Punjab, strategically located adjacent to its existing sugar mill. Initially, this new venture will focus primarily on manufacturing steel billets with a melting capacity of approximately 250,000 MT per annum. The steel project, financed through a 65:35 debt-to-equity ratio, is currently under construction. During June 2023, the Company initiated the application process to obtain "Sole Enterprise Special Economic Zone" status, and a public hearing had already been conducted. However, as per the management, the process is on hold due to current restrictions under Extended Finance Facility approved by IMF during September 2024. Additionally, Etihad Power Generation Limited (EPGL), a wholly owned subsidiary of EAPL, established to build and operate a 37.2 MW bagasse-based renewable energy power plant (the “Power Project”), got merged into its parent company, EAPL through the Order of honorable Lahore High Court, Lahore with effect from 1 July 2023. This merger would enable EAPL to finance the funding requirement and upon commissioning utilize in-house power generation at a competitive electricity cost. As a consequence, margins would improve, by way of reduction in overall production cost. The total cost of the Power Project is budgeted at PKR 9,745 million, funded through a 60:40 debt-to-equity ratio. Financial Close (FC) for the Power Project, secured through a syndicated term finance facility totaling PKR 5,850 million, has successfully achieved on August 5, 2024. As of the date of this Report, EAPL's total debt stood at PKR 2,566 million. This debt is expected to increase in the coming periods as the drawdown for the Power Project continues. As of the date of this report, EAPL had successfully repaid seven quarterly installments (both Principal and Markup) totaling PKR ~1.2 billion, starting from March 2023, through sponsor’s subordinated loan. This resilience underscores the unwavering support from its sponsors, who have consistently injected funds whenever needed. EAPL has also maintained a Debt Service Reserve Account (DSRA) that provides coverage for three months of its financial obligations until maturity. The Commercial Operation Date (COD) of EAPL (both steel and power project) is expected by October 2025. FABCON Design & Engineering (Pvt.) Limited has been appointed as the contractor for major supplies of the Power Project, bringing extensive experience and a strong record in bagasse-based power solutions.
The ratings are contingent upon the management's ability to meet completion milestones. The current ratings reflect substantial progress on the steel plant complex, and the FC of the power plant. However, the developing outlook indicates the time until the commission of both projects. Sponsor support up to the point of COD remains fundamental to the Company's financial risk profile.

About the Entity
EAPL, a venture of Etihad Group, is a private limited company incorporated in 2021 under the Companies Act of 2017. Etihad Group is recognized as one of Pakistan's leading industrial houses, with diversified operations in sugar manufacturing, construction services, and real estate. The CEO, Mr. Zahid Jamil, is the man at the last mile. He brings with him vast experience, leading various entities across multiple sectors.