·        Mughal Energy Ltd (MEL) is installing a hybrid 36.5MW coal + biofuel power plant using European boiler and turbine technology, where boiler testing is complete, and full commissioning is expected by the end of CY25.

·        The plant supports multiple fuels including RB-1, local, and Afghan coal. Management indicated that the energy cost is expected to be PkR21–22/kWh, along with a capacity cost of PkR7/kWh. Management does not plan to use local coal in the initial phases, as the plant is configured to utilize 30–35% biomass as well.

·        Plant’s generation efficiency is set at 34.5%. Management anticipates a reduction in generation costs due to a decline in commodity prices, finance costs, and the inclusion of biofuel usage.

·        The steel plant has a connected grid 90MW grid capacity, with 32–33MW net generation from MEL to be internally consumed by Mughal Steel. Working capital arrangements are being negotiated with banks.

· Parent initially financed the company due to steel sector-wide liquidity stress in recent years. Management stated that the working capital requirement would be ~PkR1bn to cover three months of imported coal inventory. Furthermore, short-term Sukuk is also a viable option to manage working capital lines.

·        Management expects savings of PkR300–350mn annually for the parent from internal power generation of 2.0mn units, which constitutes ~30% of parent’s power consumption.

·        Management clarified that banks have remained supportive in extending credit lines to the company, unlike peers. Furthermore, management pointed out that the liquidity woes of the steel sector are in the past, and expects positive developments ahead.

·        The scrip is not under our formal coverage

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