| Khavda-Bhuj Transmission Limited | ||||
| 'Crisil AAA/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 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 assigned its 'Crisil AAA/Stable’ rating to the long-term bank facilities of Khavda-Bhuj Transmission Ltd (KBTL).
The rating reflects the stable revenue profile, given the steady nature of the transmission business, fixed tariff under transmission service agreement for bids won under Section 63 of the Electricity Act., and cash flow stability under the point of connection (PoC) pool mechanism.
The rating also factors the structured payment waterfall mechanism that stipulates the creation of a debt service reserve account (DSRA) and cash sweep reserve i.e. prepayment for 50% of excess cash available for the debt service coverage ratio (DSCR), above the specified threshold. Liquidity is further cushioned by the financial policy maintained by the parent, Adani Energy Solution Ltd (AESL) policy to ensure sufficient cash for repayment of obligations under its special-purpose vehicles (SPVs), over and above individual projects taking care of their repayments. These strengths are partially offset by exposure to operations and maintenance (O&M) risk.
AESL acquired 100% stake in KBTL on January 18, 2022. The SPV was established for evacuation of 3 GW RE injection at Khavda pooling station under Phase I in Gujarat.
The project, which became operational in February 2024, includes operational 765-kilovolt (kV), 217-circuit kilometre (ckt km) transmission line linking the substations of Khavda and Bhuj. The project operates under the TBCB framework laid by the Central Electricity Regulatory Commission (CERC).
The transmission license is valid till June 2047 and can be extended till the life of TSA. The transmission service agreement (TSA) is valid till January 2059. As per the TSA, Central Transmission Utility of India (CTUIL) will shall collect the payments under the PoC mechanism. Average receivables range from 45-60 days and any further delay in receipt of payment will be monitorable.
Total project cost incurred till date is around Rs 1,100 crore. It has been debt financed through REC Ltd in 56: 44 ratio for Rs 704 Crore; though only around Rs 577 crore has been drawn till date. It has a sufficient tail period of around 10 years. As per the discussion with the management, it plans to further draw loan of Rs 40-50 crore. Any additional amount drawn, other than articulated, will be monitorable.
Though the O&M contract has been signed, the insurance cost has to be borne separately. Only insurance for the substation has been sought at the SPV level. AESL has adopted the concept of self-insurance reserve for transmission lines across its TBCB operational portfolio. For substation, bays and other related equipment, individual projects (SPVs) have sought insurance from third parties. AESL has created this reserve from its own cashflow, equivalent to 0.25% of replacement value of the transmission lines (replacement value to be determined by an independent third party), which shall increase by 0.05% annually and capped at 0.50%. This reserve is fungible across all operational TBCB transmission lines and individual amounts are not earmarked for any asset in the portfolio. In case the said reserve is utilised, AESL shall replenish the same from its cashflows. |
Analytical Approach Crisil Ratings has adopted a cash flow-based DSCR approach and has considered the standalone business and financial risk profiles of KBTL. |
Key Rating Drivers & Detailed Description Strengths:
Stable revenue profile from the long-term TSA is expected to support refinancing of debt over the remaining tenor cash flow.
Weakness:
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Liquidity: Superior Liquidity equivalent to over three months of debt servicing is maintained through a fixed deposit worth Rs 15.5 crore. The company also has cash balance and investments of ~Rs 53 crore as on December, 2024. The repayment is expected to commission from February 2025, and around Rs 5 crore for fiscal 2025.
The projected cash flow of Rs 117- 124 crore in fiscal 2026 should suffice to cover the debt obligation of maximum of Rs 90 crore, subject to further withdrawal limited to Rs 50 crore. Further, the parent maintains sufficient cash balance for all of its SPVs. |
Outlook: Stable Crisil Ratings believes KBTL should continue to generate stable cash flow, backed by its project maintaining stipulated line availability and healthy collection efficiency under the PoC pool mechanism. Also, the structural features and payment waterfall mechanism should ensure timely payment even in case of temporary distress. |
Rating sensitivity factors Downward factors
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About the Company AESL acquired 100% stake KBTL on January 18, 2022. The SPV was formed to evacuate 3 GW RE injection at Khavda pooling station under Phase I in Gujarat. PFC Consulting Ltd invited the bid under the TBCB mechanism to establish the said system, wherein AESL was the successful bidder in the reverse auction held in 2021.
The project became operational in February 2024, and includes operational 765-kilovolt (kV), 217-circuit kilometre (ckt km) transmission line linking Khavda substation to Bhuj substation. The project operates under the CERC-regulated TBCB framework. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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