Ratings of [ICRA]A

Reliance Power Limited
Instruments
Non Fund Based Limit (B/G and L/C)
Amount Rated
Rs. 5200 crores
Long Term Loans
Rs. 695 crores*
Long Term - Fund Based Limits
Rs. 80 crores
Short Term – Non fund based Limits
Rs. 40 crores
Commercial Paper/ Short-term debt
Programme/Non-Convertible Debentures
(with maturity of less than one year)
*includes ECB of US$ 25 mn
Rs. 1000 crores
Rating
[ICRA]A- (Negative) and [ICRA]A1
(reaffirmed; removed from rating
watch)
[ICRA]A- (Negative)
(assigned)
[ICRA]A- (Negative)
(assigned)
[ICRA]A1
(assigned)
[ICRA]A1
(reaffirmed; removed from rating
watch)
ICRA has reaffirmed the long-term rating assigned to the non fund based facility, aggregating to Rs.
5200 crore*, of Reliance Power Limited (R-Power) at [ICRA]A- (pronounced as ICRA A minus) while
the short term rating is reaffirmed at [ICRA]A1 (pronounced as ICRA A one) †. ICRA has also assigned
the long-term rating of [ICRA]A- (pronounced as ICRA A minus) to Rs. 695 crore term loan facility and
Rs. 80 crore fund based facility of R-Power. ICRA has also assigned short-term rating of [ICRA]A1
(pronounced as ICRA A one) to Rs. 40 crore short-term non-fund based facility of R-Power. ICRA has
also reaffirmed the rating assigned to the Rs. 1000.0 crore commercial paper programme/ short-term
debt programme/ Non-Convertible Debentures (with maturity of less than one year) of R-Power at
[ICRA]A1 (pronounced as ICRA A one). The outlook on the long term rating is „Negative‟. The ratings,
which were on watch since July 2014, have been removed from the rating watch.
The removal of the rating watch follows calling off the MoU between R-Power, though Reliance
CleanGen (RCL, its 100% subsidiary) and Jaiprakash Power Ventures (JPVL, subsidiary of
Jaiprakash Associates Limited (JAL)), for the 100% acquisition of the entire hydroelectric power
portfolio of JPVL.
The ratings continue to draw strengths from the company‟s strong capitalization and satisfactory
financial flexibility as demonstrated in its ability to tie-up loans at favorable terms with domestic &
overseas lenders for its ongoing projects. Also, the performance of Rosa Power Project (1200 MW
operational since April 2012), with entire capacity tied-up in a cost-plus based long term PPA with
UPPCL, has remained satisfactory, as evident from higher returns as compared with allowed as a
result of efficiency gains. Further, the cash collections from UPPCL have remained satisfactory as on
date. Also, Vidarbha Industries Power Limited (VIPL) has declared CoD for its entire capacity (600
MW) from March 28, 2014 with the commencement of the PPA with R-Infra from April 1, 2014 on a
“cost-plus” basis for 25 years.
The ratings however remains constrained on account of increased risk profile of the company‟s
subsidiaries in power generation business and larger support from the company to meet the cost
overrun and the debt servicing obligations of some of its subsidiaries. The ratings also factor in
significant uncertainties on timeliness and quantum of domestic gas availability for company‟s gas
based project at Samalkot, given that the debt undertaken by its subsidiary Samalkot Power Limited is
backed by the corporate guarantee from Reliance Power Ltd and the project continues to remain
stranded. While MoP is actively looking at measures such as pooling of gas & viability based support
for stranded gas based projects, the same is yet to be finalised. As the debt servicing for Samalkot
project is scheduled to start from April 2015, the company intends to restructure debt by way of
* 100 lakh = 1 crore = 10 million
†
For complete rating definition please refer to ICRA Website www.icra.in or any of the ICRA Rating
Publications
extension in project CoD & longer maturity of debt repayment and has commenced discussions with
US-Exim.
ICRA has also taken a note of significant cost overrun (to the extent of 30%) and time overrun
(expected CoD shifted to March 2015 from June 2014) for ultra mega power project on the books of
Sasan Power Limited (SPL), a wholly owned subsidiary of R-Power. While SPL has filed petitions with
Central Electricity Regulatory Commission (CERC) for requesting tariff compensation separately on
account of „Change in Law‟ & depreciation of INR against USD, order from CERC is still awaited. Also
timelines for resolution of tariff compensation issue remains uncertain. With debt repayment due from
March 2015, the company would be exposed to cash flow shortfalls in case the tariff compensation
does not materialize before the said date, in which case funding support from the group would be
required for fulfilling its debt servicing obligations.
The ratings also take into account the residual project implementation risks in the ongoing projects as
well as its status as mainly a holding company with limited asset base and revenue streams (except for
Wind 45 MW project). ICRA also notes that projects remain exposed to counter-party credit risks
associated with sale of power to state-owned distribution utilities as well as fuel supply risks, both for
coal & gas, arising out of continuing domestic coal shortages leading to dependence on costlier
sources of imported coal & uncertainties over gas availability. ICRA however notes that the counterparty credit risks are mitigated partially through adequate payment security mechanisms and fuel cost
is a pass-through in a cost plus based PPA, which in turn mitigates price risk for its thermal power
projects (Rosa and Butibori). Further, there are some measures being contemplated to alleviate the
concerns of the power sector which includes price pooling of gas and subsidy for allowing pooling of
high cost R-LNG; should these measures be successful in increasing the supply of gas to the power
sector, the same would be positive from the credit perspective.
While the company maintains limited borrowing levels on standalone basis, any higher incidence of
leveraging to fund equity commitments in project SPVs, remains key rating sensitivity. The outlook on
the Rating is Negative reflecting ICRA‟s concerns on the Sasan and Samalkot project.
Company Profile
Reliance Power Limited, a part of Reliance Group, promoted by Mr. Anil D Ambani, is the primary
vehicle for investments in the power generation sector. Reliance Power has plans to develop a number
of large sized projects, which also includes three Ultra Mega Power Projects of 4000 MW each
awarded by Government of India (GoI) on Build, Own & Operate (BOO) basis through international
competitive bidding process. The company came out with an IPO in February 2008 and raised Rs.
11560 crores for funding of equity contribution for some of the identified projects. As on September
2014, the company‟s generation capacity stands at 5285 MW which includes 5,100 MW of thermal
capacity and 185 MW of renewable energy based capacity. Its operational projects include Rosa
Project, Uttar Pradesh (1200 MW); Butibori Project, Maharashtra (600 MW), Solar Project, Rajasthan
(40 MW), Concentrated Solar Power Project, Rajathan (100 MW) and Wind Project, Maharashtra (45
MW). The company is currently focused on implementation of the projects namely: 1) Ultra Mega
Power Project (UMPP) of 3960 MW at Sasan, Madhya Pradesh (five units COD achieved; sixth unit
expected to be operational by March 2015) and 2) 2262 MW at Samalkot, Andhra Pradesh (March
2015).
Recent Results
In FY 2014, on consolidated basis, R-Power recorded OI of Rs. 5147 crore and profit after tax of Rs.
1027 crore. In H1 FY 2015, on consolidated basis, R-Power recorded OI of Rs. 3536 crore and profit
after tax of Rs. 497 crore.
January 2015
For further details please contact:
Analyst Contacts:
Mr. Anjan Ghosh (Tel. No. +91-22-3047 0049)
aghosh@icraindia.com
Relationship Contacts:
Mr. L. Shivakumar, (Tel. No. +91-22-2433 1084)
shivakumar@icraindia.com
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are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator
of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations,
with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
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