Rating Rationale
September 22, 2022 | Mumbai
Jhajjar Power Limited
Ratings reaffirmed at 'CRISIL AA-/Stable/CRISIL A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.1000 Crore
Long Term RatingCRISIL AA-/Stable (Reaffirmed)
 
Rs.800 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA-/Stable/CRISIL A1+’ ratings on the long-term bank facilities and commercial paper programme of Jhajjar Power Limited (JPL).

 

In fiscal 2022, the company’s plant load factor improved driven by higher power demand. Despite shortage of domestic coal supply in the second half of fiscal 2022, the company was able to report above normative availability, making it eligible for full recovery of fixed cost. As the variable cost is passed through in the tariff structure, the operating profitability was healthy.

 

JPL plans to refinance a shareholder loan (infused by parent, Apraava Energy Private Ltd {Apraava}) of Rs 400 crore with bank debt in fiscal 2023 and has sizeable bullet repayment in fiscal 2024, exposing it to refinancing risk. However, this risk is mitigated by the long life of the asset and presence of strong shareholders of Apraava. Furthermore, the company receives payments from counterparties within around 30 days of submission of bills, leading to healthy working capital cycle.

 

The ratings continue to reflect the company’s low offtake risk owing to power purchase agreements (PPAs), established track record of healthy generation and comfortable financial risk profile. These strengths are partially offset by exposure to risks related to weak credit risk profiles of counterparties.

Analytical Approach

CRISIL Ratings has revised its analytical approach and is now assessing the standalone credit risk profile of JPL. This is because the ultimate parent, CLP Holdings Ltd, Hong Kong (CLP Holdings; rated 'A/Stable/A1' by S&P Global) is expected to reduce its stake to 50% (currently 60%) in Apraava, JPL’s holding company. Post the reduction, Apraava will become a 50:50 joint venture, with 50% held by Canadian pension fund, Caisse de depot et placement du Quebec (CDPQ; rated ‘AAA/Stable/A-1+’ by S&P Global).

 

However, CRISIL Ratings continues to factor in the strong financial flexibility, on account of strong shareholders of Apraava - JPL’s ultimate parents - in its assessment.

Key Rating Drivers & Detailed Description

Strengths:

  • Low offtake risk: The 25-year PPAs till 2037 mitigate offtake risks and enhance revenue visibility, as offtake, at a specified tariff, is assured for the entire power generated. The tariff structure allows the company to recover its entire fixed cost, provided the plant availability factor (PAF) exceeds the normative plant availability of 80%. Furthermore, operating profitability is protected from adverse movements in domestic or international prices of coal because variable cost is passed through as part of the tariff structure, subject to normative station heat rate and auxiliary consumption.

 

  • Established track record of generation: The company has demonstrated healthy track record of generation and consistently reported above-normative PAF since fiscal 2015. PAF was 81% in fiscal 2022 (91% in fiscal 2021) despite domestic coal shortage, leading to full recovery of fixed cost. The PAF is expected to remain higher than the normative level over the medium term, driven by adequate coal supply under the fuel supply agreement (FSA) with Coal India Ltd (CIL; ‘CRISIL AAA/CCR AAA/Stable/CRISIL A1+’) for 5.2 MTPA and coal stock available at the plant.

 

Furthermore, in case of non-availability of domestic coal, JPL used imported coal to meet fuel shortfall, ensuring higher-than-normative PAF. Nonetheless, coal availability and its impact on plant availability will remain key monitorables.

 

PLF improved to 67% in fiscal 2022 from 42% in fiscal 2021, driven by higher demand. Operating performance will remain healthy over the medium term.  

 

  • Comfortable financial risk profile: Networth was strong at Rs 2,418 crore and gearing low at 0.85 time as on March 31, 2022. Interest coverage ratio improved to 3.2 times in fiscal 2022 from 2.6 times in fiscal 2021 backed by healthy cash accrual. Furthermore, JPL has strong liquidity, with free cash balance of around Rs 65 crore and bank lines worth Rs 1,150 crore which were only 35% utilised as on August 31, 2022. It also maintains a debt service reserve account (DSRA) of two quarters in the form of a bank guarantee. The financial risk profile is supported by the presence of two strong shareholders, CLP Holdings and CDPQ, which have substantial financial flexibility and are expected to provide need-based support to JPL.

 

While the company will be exposed to refinancing risk in fiscal 2024 when 40% of the outstanding debt is due for repayment, this risk is mitigated by the long remaining life of the asset, steady revenue owing to long-term PPAs and FSA, expected managerial prudence and presence of strong shareholders. With healthy accrual and no major capital expansion plans, and the company being flue gas desulpherisation (FGD) compliant since commissioning, the financial risk profile will remain healthy over the medium term.

 

Weakness:

  • Susceptibility to weak credit risk profiles of counterparties: Around 90% of JPL’s power capacity is tied up with discoms of Haryana—Dakshin Haryana Bijli Vitran Nigam Ltd and Uttar Haryana Bijli Vitran Nigam Ltd—which have weak financial risk profiles on account of high aggregate technical and commercial losses. The remaining 10% capacity is tied up with Tata Power Trading Company Ltd. To mitigate counterparty risk, PPAs provide three-tier payment security mechanism, in the form of a revolving, irrevocable letter of credit equivalent to 1.1 times the monthly billing, a default escrow mechanism and the option of sale of contracted power to third parties. Furthermore, the plant is the largest private independent power producer in Haryana and hence important to state discoms. Receivables remained stable at 90-110 days over several years and amounted to Rs 740 crore as on March 31, 2022 (Rs 729 crore as on March 31, 2021), including around Rs 350 crore of disputed payment from the discoms. The receivables are expected at a similar level over the medium term; however, timely payments by discoms will remain critical.

Liquidity: Strong

Cash and equivalent was around Rs 65 crore as on August 31, 2022 while bank limit of Rs 1,150 crore was utilised around 35%. Liquidity is aided by the presence of DSRA of six months in the form of bank guarantee and high refinancing ability. In the absence of major debt-funded capital expenditure (capex), the cash accrual, cash and equivalent and unutilised bank lines will comfortably cover debt obligation and incremental working capital requirement over the medium term.

Outlook: Stable

JPL will continue to benefit from the long-term PPAs, resulting in healthy cash accrual, subject to achievement of normative plant availability.

Rating Sensitivity factors

Upwards factors

  • Sustenance of PAF above 85%, resulting in healthy cash accrual significantly improving debt protection metrics
  • Decline in receivables leading to improved cash flow

 

Downward factors

  • PAF less than 80% owing to constraints in fuel supply
  • Large, debt-funded capex, weakening the financial risk profile

About the Company

JPL is a special-purpose vehicle promoted by Apraava. Its units were commissioned in March 2012 and July 2012. Initial project cost of Rs 6,035 crore was funded in debt-to-equity ratio of 65:35. Apraava won the bid for the 1,320-MW coal-based plant by quoting tariff of Rs 2.996 per kilowatt hour (kWh). The tariff structure of the project has two components: quoted non-escalable capacity charge, payable at normative PAF of 80%, and fuel charges payable based on quoted net heat rate of 2,396 kilocalorie per kWh. The quoted net heat rate-linked recovery of fuel charges allows fuel cost to be passed through in the tariff structure. JPL has signed PPAs, valid for 25 years, with two Haryana-based discoms for 90% of its generation capacity, and Tata Power Trading Company Ltd for the remaining 10%.

Key Financial Indicators (CRISIL Ratings’ adjusted numbers)

As on / for the period ended March 31

 

2022

2021

Operating income

Rs crore

3442

2,398

Profit after tax (PAT)*

Rs crore

-69

113

PAT margin*

%

-2.0

4.7

Adjusted debt / adjusted networth

Times

0.85

1.01

Adjusted interest coverage

Times

3.16

2.59

* includes impact of Rs 280 crore exceptional item pertaining to impairment of assets

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

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Annexure - Details of Instrument(s)

ISIN Name of
instrument		 Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA Long Term Loan NA NA Apr-25 89.52 NA CRISIL AA-/Stable
NA Long Term Loan NA NA Nov-23 13.66 NA CRISIL AA-/Stable
NA Long Term Loan NA NA Dec-23 65.68 NA CRISIL AA-/Stable
NA Long Term Loan NA NA Nov-23 0.55 NA CRISIL AA-/Stable
NA Long Term Loan NA NA Mar-32 400 NA CRISIL AA-/Stable
NA Long Term Loan* NA NA Dec-24 221.6 NA CRISIL AA-/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 208.99 NA CRISIL AA-/Stable
NA Commercial Paper NA NA 7-365 days 800 Simple CRISIL A1+

*consists of 3 separate loan tranches

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1000.0 CRISIL AA-/Stable   -- 23-09-21 CRISIL AA-/Stable 24-09-20 CRISIL AA-/Stable 30-09-19 CRISIL AA-/Stable CRISIL AA-/Stable
Commercial Paper ST 800.0 CRISIL A1+   -- 23-09-21 CRISIL A1+ 24-09-20 CRISIL A1+ 30-09-19 CRISIL A1+ CRISIL A1+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 13.66 Aditya Birla Sun Life Insurance Company Limited CRISIL AA-/Stable
Long Term Loan& 221.6 Axis Bank Limited CRISIL AA-/Stable
Long Term Loan 89.52 ICICI Bank Limited CRISIL AA-/Stable
Long Term Loan 0.55 IDFC FIRST Bank Limited CRISIL AA-/Stable
Long Term Loan 65.68 India Infrastructure Finance Company Limited CRISIL AA-/Stable
Long Term Loan 400 Power Finance Corporation Limited CRISIL AA-/Stable
Proposed Long Term Bank Loan Facility 208.99 Not Applicable CRISIL AA-/Stable
This Annexure has been updated on 13-Mar-2023 in line with the lender-wise facility details as on 23-Feb-2023 received from the rated entity.
& - consists of 3 separate loan tranches
Criteria Details
Links to related criteria
Rating Criteria for Power Distribution Utilities
Rating Criteria for Power Generation Utilities
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
The Rating Process
CRISILs Criteria for rating short term debt

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