Mughal Energy Limited Progresses on 36.5MW Hybrid Power Plant, Receives Stable Ratings from PACRA

Lahore, Mughal Energy Limited (MEL), a subsidiary of Mughal Iron & Steel Industries Limited (MISIL), is making significant strides in the energy sector with its ongoing project to install a 36.5MW hybrid captive power plant. The plant, primarily intended to supply electricity to MISIL, has received a stable entity rating from The Pakistan Credit Rating Agency Limited (PACRA).

According to The Pakistan Credit Rating Agency Limited, MEL has been granted a 30-year generation license by the National Electric Power Regulatory Authority (NEPRA), starting from the Commercial Operation Date (COD). The project, with an estimated total cost of PKR 6.5 billion, is expected to follow a debt-to-equity financing mix of 60:40. The debt financing will be directed towards the installation and testing of the plant for commercial operations. The company has already made significant progress in procuring the plant and land for the plant site, with equity provided by the sponsors, thereby reducing procurement risk. The plant equipment is already on-site, and local contractors have been assigned for civil work, installation, fabrication, and testing, which is expected to take around 13 months.

The construction of the plant, which began in October 2023, is anticipated to be completed within 18 months from the start date. The use of local engineering, procurement, and construction (EPC) services is noted to insulate against the risks associated with foreign EPCs, particularly travel risks. Furthermore, off-take risks are mitigated as a long-term power purchase agreement has already been signed with MISIL. In a significant move to support the project, MISIL has approved the issuance of a corporate guarantee of PKR 6 billion in favor of banks on behalf of MEL for availing financing for a period of 5 years.

The assigned rating by PACRA reflects the strength and business acumen of the group. The timely completion and successful commissioning of the project are crucial for maintaining the assigned ratings and the future financial stability of MEL.

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