ICRA has reaffirmed the long-term rating outstanding on Rs. 1350 crore long term loans of Alstom Bharat Forge Power Limited (ABFPL) at [ICRA]BBB+ (pronounced ICRA triple B plus). ICRA has also reaffirmed the short-term rating outstanding on Rs. 1890 Crores non-fund based limits of ABFPL at[ICRA]A2+ (pronounced ICRA A two plus)). The outlook on the long term rating is stable.
The aforementioned ratings were placed under rating watch with developing implication which has been removed.
The rating reaffirmation factors in the comfort from technical, managerial and financial support available from both the sponsors i.e. Bharat Forge Limited (BFL) rated by ICRA at [ICRA]AA-/[ICRA]A1+ and Alstom Power Holdings SA (100% subsidiary of Alstom SA). ABFPL is expected to benefit immensely from technical competence of Alstom in the power equipment's space and BFL’s established presence within India. The ratings also factor in the satisfactory long-term demand prospects for super-critical technology based power generation units given in huge demand-supply mismatch in the domestic power sector notwithstanding the short-term concerns impacting the power sector. Moreover, ABFPL has a current order book for supplying five supercritical STG (Steam Turbine Generator) to NTPC, which lends some visibility to company’s revenues in the short to medium term.
The ratings are however constrained by the in delays in project completion due to shifting its project to a new location and the associated project execution risks. Moreover, ratings factor in high level of competitive pressures in the super-critical STG industry from both indigenous manufacturers (setting up large capacities in JV’s with foreign players) and relatively cheaper imports from China. Ratings also factor in coal shortages, regulatory issues and uncertain financing scenario from banks in the power sector which can delay the capacity addition in the power sector and adversely affect the order book and revenue booking in the near-term. ICRA also takes into account weakening credit profile of Alstom SA, ultimate holding company of Alstom Power Holdings which has 51% shareholding in ABFPL, as reflected by ratings downgrade from Baa2(negative) to Baa3 (Stable) by Moody’s.
The removal of ratings watch factors in the finalization of company’s plans of shifting its manufacturing facility to Sanand, Gujarat and completion of land acquisition for the project after High Court of Gujarat had instructed ABFPL to cease all construction activities in Adani Port Special Economic Zone (APSEZ) until the SEZ obtains the Environmental Clearance from MoEF (Ministry of Environment and Forests), GoI.
Project Profile
The company is setting up the project to manufacture turbine generators in both the super-critical and sub-critical range of (300 MW - 800 MW) rating. The annual capacity of the project is 5000 MW and the project (with estimated initial cost to the tune of Rs. 1950 crore) will be funded in a debt to equity ratio of 70:30. The equity contribution will be in the ratio of 51:49 by Alstom Power Holdings SA and BFL. The company has incurred a capital expenditure of ~Rs. 279 crore till date. In May 2012, High Court issued an order which has prohibited any construction at company’s premises within Mundra SEZ due to absence of environmental clearance with the SEZ. The company had stopped construction at its premises subsequent to the High Court ruling and has decided to shift its manufacturing unit to Sanand, Gujarat.
