CARE downgrades GVK Power to 'BBB+'...

 

Credit Analysis & Research (CARE) has downgraded the long-term bank facilities rating of GVK Power & Infrastructure from 'A-' to 'BBB+' aggregating to Rs 4.25 billion.

CARE has also downgraded the long/ short-term bank facilities rating from 'A-/ A2' to 'BBB+/ A3+' aggregating to Rs 1.20 billion (reduced from Rs 2 billion) of the company.

The revision in the ratings of GVK Power and Infrastructure (GVKPIL) takes into consideration deterioration in financial performance of the company during FY13 (FY refers to the period April 1 to March 31) and H1FY14, decline in operating performance of gas based power plants of the group, deterioration in capital structure of the company and delay in execution of projects under implementation in the hydro and thermal energy segments.

The ratings continue to derive strength from the experience of the promoters and management team, track record of successful execution of projects, well-diversified portfolio of assets under operation and development and long term growth prospects for the infrastructure sector.

The ratings, however, continue to be constrained by high investment commitments of subsidiaries and step down subsidiaries, inherent risk associated with development of greenfield infrastructure projects and exposure to the subsidiaries and other group companies in the form of corporate guarantees.

The ability of the company to raise funds in a timely manner, improve capital structure and meet equity commitments of group companies, as per the schedule without any further deterioration in the financial risk profile are the key rating sensitivities.

Shares of the company declined Rs 0.03, or 0.36%, to settle at Rs 8.25. The total volume of shares traded was 1,096,235 at the BSE (Friday).

Source

Read More...

ICRA reaffirms TPDDL's loan facilities at "ICRA AA-"...

 

ICRA has reaffirmed Tata Power Delhi Distribution Limited's (TPDDL) Rs. 4,500 crore term loans and Rs. 145 crore fund-based limits at "ICRA double A minus". Moreover, ICRA has also reaffirmed a rating of "ICRA A one plus" assigned to the Rs. 725 crore non-fund based limits and Rs. 500 crore short-term debt programme of TPDDL.

According to the rating agency's report, the rating action has factored in the satisfactory working of the cost plus tariff mechanism in Delhi as reflected by significant hike in tariffs allowed over the past three years which has made current tariffs nearly cost reflective.

While the ratings continue to derive comfort from the company’s favourable operating position arising from the cost-plus nature of its core business, ICRA was happy to note TPDDL's ability to meet the stringent operating parameters including AT&C loss reduction measures laid down by DERC.

However, the above ratings are constrained by significant build of receivables on account of revenue under recoveries as power purchase costs increased significantly over the years. Further, lower sale rate for surplus power as against the rates approved by DERC has continued to result in power-cost under-recoveries.

As for the key rating sensitivities, the company has listed out certain factors which include TPDDL's timing of additional tariff hikes and its adequacy to not only cover increasing cost of power but also permit eventual liquidation of past under-recoveries.

Read More...

ICRA reaffirms ratings for bank facilities of Alstom Bharat Forge Power Limited...

 

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.

Source

Read More...

Tata Power's long term corporate credit Rating lowered by Standard & Poor's

 

Long Term Corporate credit rating of Tata Power limited has been reduced from BB to B+ by Standard & Poor's Rating Services. The outlook is negative.

Further, the issue rating on the company's outstanding senior unsecured notes due 2017 has been lowered from BB- to B+ as according to Standard & Poor's, the company's cash flows are likely to remain weak with a ratio of funds from operations (FFO) to adjusted debt at less than 10% over next 12 months.

According to the Standard & Poor's, the primary drivers for Tata Power's lower cash flows on a consolidated basis are less-than-full recovery of fuel costs at a 4,000 megawatt coal-fired project at Mundra and lower returns from investments in Indonesian coal companies because of substantially reduced thermal coal prices.

The fully operational Mundra project exposes Tata Power to volatility in coal prices because the company can only pass through a part of fuel costs to its customers. The project's ability to blend fuel with some low calorific value coal tempers the fuel-price risk.
India's Central Electricity Regulation Commission (CERC) recently issued an order for a full pass through of fuel costs at the Mundra project. A committee set up by CERC also recommended a mechanism for payment of a compensatory tariff to recover fuel-cost related losses at the project.

These measures are likely to improve Tata Power's cash flows. However, the timing and quantum of the tariff remain uncertain. We expect Tata Power's ratio of FFO to debt to be about 7.5% in fiscal 2014 and rise to 10%-14% in fiscal 2015 if the compensatory tariff becomes effective in 2015.

As said by the S&P

"We believe lenders to the Mundra project are likely to support the project despite the expiry of a waiver on a bank loan covenant breach in June 2013. We assess Tata Power's liquidity as ""less than adequate,"" as our criteria define the term. Tata Power's weak consolidated cash flows are likely to weaken its ability to pay maturing debt over the next 18 months. Tata Power has large bullet debt maturities totaling about US$670 million due in April 2014, July 2014, November 2014, and April 2015. We believe the company might undertake measures to meet its funding requirements,

The negative outlook reflects the uncertainty regarding the company's plan to refinance its debt maturities over the next 12-18 months, The outlook also reflects uncertainty regarding approvals for the tariff relief at Mundra.

We may lower the rating if Tata Power's liquidity weakens further or if the company faces difficulty in refinancing its upcoming debt maturities in a timely manner. A downgrade could also follow a further deterioration in cash flows, such that the ratio of FFO to debt reduces to 5%-7% on a sustained basis. We believe this could occur if coal prices decline further or remain low for a sustained period, or if approvals for the tariff relief are not available beyond 2015.

We may revise the outlook to stable if Tata Power has a concrete plan to meet its upcoming debt maturities; eliminates its bank loan covenant breaches; and faces no material deterioration in its business."

 

---

More literature on this...

• http://economictimes.indiatimes.com/news/news-by-industry/energy/power/tata-powers-rating-lowered-to-b-on-weak-cash-flows-outlook-negative/articleshow/22370033.cms

---

Read More...