Pakistan Credit Rating Agency Limited (PACRA) has assigned Mughal Energy Limited (GEMMEL) a long-term credit rating of ‘A’ and a short-term rating of ‘A2’, underscoring its financial stability and future potential. The rating reflects GEMMEL’s strategic role as a wholly owned subsidiary of Mughal Iron & Steel Industries Limited (MISIL), following its acquisition in November 2023.
GEMMEL is currently developing a 36.5 MW hybrid captive power plant, designed to operate on both indigenous and imported coal, as well as bark, to supply electricity exclusively to MISIL. The project, estimated at a cost of PKR 6.5 billion, is being financed with a 65:35 debt-to-equity ratio.
Despite delays, the company has made significant progress. As of November 2024, civil work at the site is nearing completion, though the project’s overall progress stands at 36.5%, slightly behind the planned 46%. Installation is expected to begin soon, with commissioning anticipated within 18 months from the start of construction in October 2023.
The off-take risk is minimized by a long-term power purchase agreement with MISIL, ensuring stable demand once the plant becomes operational. Additionally, GEMMEL is in the process of issuing a PKR 2.5 billion Sukuk to secure the remaining financing, backed by corporate guarantees from MISIL amounting to PKR 6 billion.
The developing outlook reflects the ongoing efforts to secure financing and meet project milestones. PACRA has highlighted the importance of timely project completion to maintain the assigned ratings, emphasising the strength and business acumen of the Mughal Group in navigating these challenges.
