PACRA maintains entity ratings of Mughal Energy

December 01, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Mughal Energy Limited (MEL) at "A" for long term and "A2" for short term with a stable outlook forecast, the latest press release issued by PACRA showed.

The company is a wholly owned subsidiary of Mughal Iron & Steel Industries Limited (MISIL).

The company is in the process of installing a 36.5MW hybrid captive power plant that will supply electricity majorly to the MISIL.

The company has been granted a generation license by NEPRA of 30 years starting from the Commercial Operation Date (COD).

The total estimated cost of the project is Rs6.5 billion which will be financed through an expected debt-to-equity mix of 60:40.

The debt financing will be utilized for the installation and testing of the plant for commercial operations.

MEL has already procured the plant and land for the plant site through equity injected by the sponsors, thus mitigating the procurement risk.

The plant equipment is already at the site, providing further comfort.

The company has assigned local contractors for the civil work, installation, fabrication and testing of the plant at the site which will take approximately 13 months.

The plant is expected to be commissioned within 18 months from the construction start date, which was started in October’23.

Local EPC insulates against the risk of foreign EPC travel risk.

Further, the off-take risk is mitigated as the long-term power purchase agreement has already been signed with MISIL.

MISIL has approved the issuance of a corporate guarantee of PKR 6bln in favor of banks on behalf of MEL to avail financing for 5 years.

The assigned rating captures the group's strength and business acumen. Going forward, timely completion of the project and successful commissioning of the plant remain crucial to uphold the assigned ratings.

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