July 18, 2017 Raigarh Champa Rail Infrastructure Private Limited Summary of rated instruments Instrument* Rated Amount Rating Action (in Rs. crore) Term Loans 355.46 Revised to [ICRA]D from [ICRA]C (revised from Rs. 990.00) Unallocated 634.54 Revised to [ICRA]D from [ICRA]C (earlier Nil) *Instrument details are provided in Annexure-1 Rating action ICRA has revised the long-term rating to [ICRA]D (pronounced ICRA D) from [ICRA]C (pronounced ICRA C)1 for the term loans and unallocated limits of Raigarh Champa Rail Infrastructure Private Limited (RCRIPL), aggregating to Rs. 990.00 crore. Rationale The revision in ratings assigned to RCRIPL factors in the delays in servicing of debt obligations by the company owing to delays in execution of its railway siding project for use by the 3600 MW thermal power project (TPP) of its group company, KSK Mahanadi Power Company Limited (KMPCL) in Chhattisgarh. The company is developing a merry-go-round (MGR) rail system from the power plant site of KMPCL to the nearest railway station at Akaltara. While the inward line of the railway siding project has been operational since October 2013 and is being used for supplying coal to the operational capacity of 1200 MW of KMPCL, the outgoing line has witnessed delays in execution with the commissioning now expected by December 2017, due to execution related challenges, delays in execution of the end-use project and funding issues for the KSK group. The rating is also constrained by the weak credit profile of its sole counterparty, KMCPL, due to long delays in implementation of its TPP, owing to execution related challenges and delays in securing funding for cost overruns. ICRA notes that the lenders to KMPCL, while approving the revised commissioned schedule and debt sanction for cost overruns, directed the merger of ancillary assets including RCRIPL with KMPCL, which is underway. Key rating drivers Credit strengths . Limited permitting risks for the railway line being implemented by RCRIPL with required approvals in place . Incoming line of the MGR rail system is operational and is being used by the end-use project for transporting coal for its operational capacity of 1200 MW 1 For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications Credit weaknesses . Delays in implementation of outgoing line coupled with the weak credit profile of the sole counter- party has led to delays in debt servicing by the company . Financial profile of the counter-party is constrained by delays in implementation of its thermal power project, delays in securing funding for cost overruns and fuel availability issues for the operational capacity . Capital cost for the railway siding from power plant site to Akaltara has escalated to Rs. 488.60 crore, as against Rs. 284 crore envisaged at the time of initial appraisal, due to delays in execution Description of key rating drivers RCRIPL is responsible for the development, construction and operation of the 15.7 KM railway line (incoming and outgoing lines from power plant boundary) from power project site of KMPCL to Akaltara railway station. The incoming line of this project was commissioned in October 2013 and is being used to transport coal to the two operational 600 MW units of KMPCL and the outgoing line is scheduled to be commissioned by December 2017. The lenders have revised the project cost for RCRIPL from Rs. 1320.61 crore to Rs. 488.60 crore due to cancellation of phase-II of the project, which involved construction of railway line from the Kharsia railway station to Gare Pelma III mine, in view of the cancellation of the coal mine tied up by KMPCL, as per the Supreme Court order in September 2014. However, the capital cost for phase-I i.e. from power project to Akaltara station has increased from the initially envisaged cost of Rs. 284 crore due to delays in execution. The delays in execution can be attributed to execution related challenges, delays in execution of the end-use thermal power project and funding issues for the group. The end use project under KMPCL has witnessed significant delays in implementation caused by execution related challenges and delays in securing funding for cost overruns. The first two units of the project are operational (first unit in August 2013 and second unit in August 2014) and supplying power to the distribution utilities in Andhra Pradesh, Telangana, Tamil Nadu and Uttar Pradesh. However, the fuel supply risks for these units remain high due to lack of long-term fuel supply agreements for domestic coal. Also, the progress on the remaining four units has been slow. The project cost has been revised to Rs. 27080 crore from the initial appraised cost of Rs. 16190 crore, primarily due to delays in execution and steep depreciation of rupee against US dollar on imported equipment. While approving the cost overruns for KMPCL, the lenders have stipulated the merger of RCRIPL with KMPCL as one of the conditions. The merger process is currently underway. Key financial indicators of RCRIPL NA Analytical approach For arriving at the rating, ICRA has taken into account the standalone fundamentals of the company and has applied its methodologies as given below. Links to applicable criteria Corporate Credit Rating – A Note on Methodology About the company RCRIPL is a special purpose vehicle promoted by KSK Energy Company Private Limited for developing private railway siding and other related infrastructure for transportation of coal to 3600 MW thermal power plant of KMPCL under implementation at Nariyara village, Janjgir-Champa district in Chhattisgarh. The project was earlier envisaged by RCRIPL in two phases, with phase-I involving construction of the railway line from power project site to Akaltara station and loading platform at Kharsia station, while phase-II involves the construction of siding at Kharsia station and railway line from Gare Pelma III mine to Kharsia station. However, with the de-allocation of the Gare Pelma III mine as per the Supreme Court order in September, 2014, the company has shelved its plans for the link between Kharsia and Gare Pelma III mine and limited the project to the railway siding from KMPCL’s project site to Akaltara station. Status of non-cooperation with previous CRA: Not applicable Any other information: Not applicable Rating history for last three years Table: S.No Instrument Current Rating Chronology of Rating History for the past 3 years Type Rated Date & Date & Rating Date & Date & amount Rating in FY2017 Rating in Rating in (Rs. FY2016 FY2015 Crores) September September November July 2017 2016 2015 2014 1 Term Loan Long 355.46 Term [ICRA]BB [ICRA]BBB- [ICRA]D [ICRA]C (Negative) @ 2 Unallocated Long 634.54 Limit Term [ICRA]D - - - @: under rating watch with negative implications Complexity level of the rated instrument ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.icra.in Annexure-1 Instrument Details Instrument Date of Coupon Rate Maturity Amount Current Rating Issuance / Date Rated (Rs. Sanction crore) Term Loans - - March-2028 355.46 [ICRA]D Unallocated - - - 634.54 [ICRA]D Limits Source: RCRIPL Contact Details Analyst Contacts Mr. Sabyasachi Majumdar Mr. Girishkumar Kadam +91-124-4545304 +91-22-61143441 [email protected] [email protected] Mr. Vikram V +91-40-40676518 [email protected] Relationship Contact Mr. Shiva Kumar +91-22-61143406 [email protected] About ICRA Limited: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder. For more information, visit www.icra.in © Copyright, 2017, ICRA Limited. 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