The Pakistan Credit Rating Agency Limited
01-Dec-23
Analyst
Ali Arslan Malik
Ali.Arslan@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Correlation Between Long-term & Short-term Rating Scales | Jul-23
- Methodology | Independent Power Producer Rating | Jul-23
- Methodology | Rating Modifiers | Apr-23
Related Research
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA
PACRA Maintains the Entity Ratings of Mughal Energy Limited
| Rating Type | Entity | |
|
Current (01-Dec-23 ) |
Previous (01-Dec-22 ) |
|
| Action | Maintain | Initial |
| Long Term | A | A |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
Mughal Energy Limited (MEL) or the Company is a wholly own 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 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 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 with-in 18 months from the construction start date, which was started in October’23. Local EPC insulates against risk of foreign EPC's 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 issuance of corporate guarantee of PKR 6bln in favor of banks on behalf of MEL for the purpose of availing financing for a period of 5 years.
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.
About
the Entity
Mughal Energy Limited (MEL) or “the Company” was incorporated as a Public Limited Company in Pakistan on 19th August, 2012. MEL is wholly owned subsidiary of the MISIL. Mr. Mirza Javed Iqbal is the Chairman of the board and holds diversified experience in the iron and steel industry. Mr. Khurram Javed is the CEO of the Company and has been involved in the family business.