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PACRA Assigns Initial Entity Ratings to Mughal Energy Limited

Lahore, December 01, 2022 (PPI-OT):Mughal Energy Limited (MEL) or the Company is an associated company of Mughal Iron and Steel Industries Limited (MISIL). The Company is in the process of installing a 36.5MW coal captive power plant that will supply electricity to MISIL under the Bulk Purchase Agreement that is yet to be finalized. 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 PKR 6.5bln which will be financed through expected debt to equity mix of 60:40. The debt financing will be utilized towards installation and testing of the plant for commercial operations.

The company has already procured the plant and land for 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 plant is expected to be commissioned with-in 15 months from the construction start date, which is expected to start in few days.

Further, the off take risk will be addressed with finalization of long term power purchase agreement with MISIL. MISIL has approved issuance of corporate guarantee of PKR 6bln in favour of banks on behalf of MEL for the purpose of availing financing for a period of 5 years. The Company has assigned local contractors for the installation and testing of the plant at the site which will take approximately 14 months. Local EPC insulates against risk of foreign EPC’s travel risk.

The assigned rating captures the groups strength and business acumen. Going forward, timely completion of the project and successful commissioning of the plant remains crucial to uphold the assigned ratings. The finalization of Bulk Purchase Agreement, Coal Supply Agreement and Operations and Maintenance Agreement would provide further comfort towards the assigned ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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