Karachi, July 14, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Mughal Energy Limited (MEL). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings is ‘Stable’.
MEL is an associated company of Mughal Iron and Steel Industries Limited (MISIL), one of the largest steel manufacturing concern in Pakistan. The majority shareholders (~76%) of MISIL hold 100% stake in MEL. The company is in process of installing a 36.5 MW hybrid power plant, adjacent to MISIL plant, for uninterrupted supply of electricity to MISIL. The project is expected to achieve commercial operations by Sep’22.
The project is planned to be funded through debt to equity mix of 72:28. MISIL has issued a cross corporate guarantee in favor of banks to the tune of 1.5 times of bank borrowings for a period of 5 years. The loans have also been secured by way of personal guarantees of all directors. Power Purchase Agreement (PPA) is expected to be signed with MISIL shortly. The sponsors have contributed the agreed proportion of equity through land and payment of first instalment.
A well renowned local contractor has been finalized for the provision of engineering, project management, procurement, construction and commissioning management. MEL plans to enter into long-term Operations and Maintenance (O and M) agreement with the same contractor after the project becomes operational. While construction risk remains, the ratings will be dependent on completion of project within the stipulated timeframe.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/