Press Release

VIS Assigns Initial Ratings to Mughal Energy Limited

Karachi, July 14, 2021: 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 & 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 installment. 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 & Maintenance (O&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 further information on this rating announcement, please contact Ms. Tayyaba Ijaz at 042-35723411-13 (Ext. 8004) and/or Ms. Faryal at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk


Saeed Khan
Executive Director


Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright July 14, 2021 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.