Press Release
THDC India Limited April 03, 2019 Ratings Amount Facilities Rating1 Rating Action (Rs. crore) 600.00 CARE AA+; Stable Long- term Bonds Reaffirmed (Rupees Six Hundred Crore Only) [Double A Plus; Outlook: Stable] Long-term Bank Facilities - - Withdrawn (Term Loan) Details of instruments/facilities in Annexure-1 Detailed Rationale & Key Rating Drivers The reaffirmation of the rating assigned to the long term bonds of THDC India Limited continue to derive strength from the majority ownership of THDC by Government of India (GoI), strong operating efficiency of its power stations & wind assets and healthy financial risk profile of the company. The ratings also factors in cost plus tariff structure for its majority capacity as per Central Electricity Regulatory Commission tariff guidelines coupled with revenue visibility backed by long- term power selling arrangements. The rating also takes cognizance of the risks associated with the implementation of ongoing projects and below average credit profile of the company’s power off-takers. Going forward, the ability of the company to execute the capex plans within the time and cost estimates and timely receipt of dues from its off-takers shall be the key rating sensitivities. CARE has withdrawn the rating assigned to the Bank Facility- Term Loan of Rs. 1500.00 crore of THDC India Limited with immediate effect, as the company has repaid the aforementioned term loan in full and there is no amount outstanding under the said term loan as on date. Further, the CARE has also withdrawn the rating assigned to the proposed term debt of Rs. 500.00 crore as company has not raised any debt against the same. Detailed description of the key rating drivers Majority ownership by the GoI THDC was established as a joint venture between the GoI and Government of Uttar Pradesh (GoUP) to develop, operate and maintain Tehri Hydro Power Complex and other Hydro Projects. The equity contribution towards the projects has been shared in the ratio of 74:26 by the GoI and the GoUP respectively. THDC’s management consists of an experienced team of professionals having considerable experience in fields like design and engineering, project implementation, project finance, human resources, etc. Strong operating efficiency of hydro power stations & Wind power assets During FY18, THDC’s operating power stations, viz. Tehri HPP and Koteshwar HEP has generated 4,301 MUs of power (PY: 4,371 MUs) as against annual design energy of 3,952 MUs. The performance of the hydro assets continued in 11MFY19 and generation from both the plants stood at 4,033 MUs. The wind assets of the company namely, Patan- 50 MW & Devbhumi Dwarka- 63 MW has achieved CUF of 22.77% & 30.96% respectively in 11MFY19 as against P90 CUF of 25.22% & 26.27% respectively. Healthy financial risk profile The company has healthy financial risk profile marked by comfortable profitability margins, healthy capital structure and debt coverage indicators. The PBILDT margin of the company stood comfortable at 77.60% in FY18 as against 78.76% in FY17. The moderation is attributable to higher employee cost and other expenses. The capital structure of the company stood healthy as evident from overall gearing of 0.48x as on March 31, 2018 (PY: 0.59x). The improvement is attributable to payment of term loan from State Bank of India coupled with scheduled repayment of term debt. Further, total debt to gross cash accruals and interest coverage ratio of the company stood healthy at 3.09x (PY: 4.12x) and 7.46x (PY: 5.69x) as on March 31, 2018 respectively. Moderate liquidity Profile The company has comfortable liquidity profile marked by cash and bank balance of Rs. 57.08 crore as on September 30, 2018. Further, the average utilization of working capital limits of the company stood lower at 44% for the trailing 14 months ended February 2019. Improving collection period The company has registered improvement in the collection efficiency, which resulted in reduction in gross debtors to Rs. 1514 crore as on March 31, 2018 as against Rs. 1962 crore as on March 31, 2017. The average collection period of the company improved to 253 days as on March 31, 2018 (PY: 329 days). The improvement is attributable to recovery of overdue debtors, largely from Uttar Pradesh Power Corporation Limited. Regulated returns leading to steady operating cash-flows The tariff for each of the hydro power stations of THDC is determined by CERC by referring to Annual Fixed Cost (AFC), which comprise of interest on loan, interest on working capital, depreciation and operation and maintenance expenses and post-tax Return on Equity (ROE) at 16.50%. 50% of AFC is recoverable upon achieving the design energy, while the
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Press Release balance is recoverable on achieving the Normative Annual Plant Availability Factor (NAPAF) which has been prescribed for each hydro power station by CERC. Off-take risk mitigated through PPAs with distribution utilities For off-take of the power, THDC has entered into long-term PPA for the entire Tehri Hydro Power Complex of 2,400 MW (including under construction Tehri PSP) with various beneficiary states. The PPA for Patan wind power project (50MW) and Devbhumi Dwarka wind power project (63MW) has also been signed with Gujrat Urja Vikas Nigam Limited (CARE AA-; Stable/ CARE A1+). Furthermore, THDC has also signed PPA for Vishnugarh Pipalkoti HEP (VPHEP) 444 MW and Khurja STPP (1320 MW). The presence of long term PPAs for the sale of power protect the earnings of the company. Key Rating Weaknesses Below average financial profiles of beneficiaries viz power distribution utilities The financial health of many of the state distribution utilities continues to remain a cause of concern for the power generating companies including THDC. The higher level of Aggregate Transmission and Commercial (AT&C) losses, the rising power purchase costs and the absence of cost reflective tariff regimes have put a strain on the financial position of some of the state distribution utilities. Risk associated with projects under implementation THDC is currently developing Tehri PSP (1,000 MW), VPHEP (444 MW), Dhukwan SHP (24 MW) projects. Till Feb 2019, the company had incurred a total cost of Rs. 4,589 crore on above projects. Further, the company is also implementing Khurja STPP (1320 MW). The company has incurred Rs. 487.38 crore till Feb 2019 on Khurja project against the estimated cost of Rs. 11,089.42 crore and company is yet to tie up funding for the project. The execution of such large projects exposes company to both funding and implementation risk. The implementation risks are accentuated given the difficult terrain and inherent risks associated with the hydro power projects coupled with weak financial position of civil contractors. Analytical approach: Standalone Applicable Criteria CARE’s Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology - Infrastructure Sector Ratings Financial ratios – Non-Financial Sector Policy on Withdrawal of ratings About the Company THDC India Limited (formerly known as Tehri Hydro Development Corporation Ltd.), is a Joint Venture of Govt. of India and Govt. of Uttar Pradesh. Initially the shareholding was held by GoI and GoUP in the ratio 3:1 which was subsequently changed to 74:26. The company was incorporated in July, 1988 to develop, operate & maintain the 2400 MW Tehri Hydro Power Complex and other hydro projects. The 2400 MW Tehri Hydro Power Complex comprises of Tehri Dam & HPP (1000 MW) Stage-I, Koteshwar HEP (400 MW) & Tehri PSP (1000 MW; under implementation). THDC has a total commissioned power generation capacity of 1513 MW (Tehri Dam & HPP: 1000 MW, Koteshwar HEP: 400 MW, Wind- Patan: 50 MW and Wind- Dev Bhoomi: 63 MW). Further, the company is also implementing Khurja STPP (1320 MW) for which the company had received the approval from Cabinet Committee on Economic Affairs. .Brief Financials (Rs. crore) FY17 (A) FY18 (A) Total operating income 2,111 2,203 PBILDT 1,663 1,709 PAT 714 774 Overall gearing (times) 0.59 0.48 Interest coverage (times) 5.69 7.46 A: Audited Status of non-cooperation with previous CRA: NA Any other information: NA Rating History for last three years: Please refer Annexure-2
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Analyst Contact: Name: Mr. Sudhir Kumar Tel: 011-45333232 Email: [email protected]
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Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, 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. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.
Annexure-1: Details of Instruments/Facilities Size of the Name of the Date of Coupon Maturity Rating assigned along Issue Instrument Issuance Rate Date with Rating Outlook (Rs. crore) Term Loan-Long Term - - - - Withdrawn Bonds Oct 03, 2016 7.59% Oct 03, 2026 600.00 CARE AA+; Stable
Annexure-2: Rating History of last three years Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2018-2019 2017-2018 2016-2017 2015-2016 1. Term Loan-Long Term LT - - 1)CARE AA+; - 1)CARE AA+; 1)CARE AA+ Stable Stable (14-Jan-16) (05-Apr-18) (24-Feb-17) 2. Bonds LT 600.00 CARE 1)CARE AA+; - 1)CARE AA+; - AA+; Stable Stable Stable (05-Apr-18) (24-Feb-17) 2)CARE AA+ (28-Sep-16) 3. Fund-based - ST-Term ST 600.00 CARE 1)CARE A1+ - - - loan A1+ (03-Sep-18)
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