| Lalitpur Power Generation Company Limited | ||||||
| Rating reaffirmed at 'CCR BBB / Stable'; 'CRISIL BBB / Stable / CRISIL A3+ ' assigned to Bank Debt | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL BBB/Stable/CRISIL A3+' ratings to the bank facilities of Lalitpur Power Generation Company Limited (LPGCL).
CRISIL Ratings has also reaffirmed its corporate credit rating of ‘CCR BBB/Stable’ to LPGCL.
LPGCL’s business risk profile benefits from low offtake risk backed by long-term power purchase agreements (PPA), long-term fuel supply agreement (FSA) and timely cash flows received through escrow mechanism in place for a portion of the power sales to selected pockets in the state of Uttar Pradesh, and comfortable debt service coverage ratio (DSCR). These strengths are partially offset by moderate counterparty risk especially on the power sold to UPPCL and risks inherent to thermal power plants. |
Key Rating Drivers & Detailed Description Strengths: Low offtake and fuel risks owing to PPAs and FSAs The company has a 25-year take or pay PPA with Uttar Pradesh Power Corporation Limited (UPPCL) for 100% of its capacity, which assures offtake. The PPA is based on two-part tariff – fixed and variable. Hence, rise in fuel costs, interest costs or any other overheads have a direct pass through to UPPCL. LPGCL can claim full fixed charges if it maintains 85% of plant availability (PAF) per annum.
Additionally, the plant has adequate fuel linkage (incl. Inter Party Transfer coal) for its coal requirement of 8.74 MTPA which is sufficient for meeting 85% PLF with 1,980 MW capacity. Moreover, in case of further coal requirement or unavailability of coal, LPGCL can procure coal from other alternate sources (special forward e-auction) which if entails price variance, is fully passed through to UPPCL. This protects from any major fluctuations in profitability.
Escrow collections provide stable cash flows LPGCL has earmarked exclusive collection units under a tripartite agreement between UPPCL, LPGCL and escrow agent banks, wherein it receives collection directly from the end-customers of UPPCL. Historically, the company has received Rs 240 crores average monthly collections through this mechanism. Backed by increasing power demand, absence of any lockdown like conditions, and expected negotiations between LPGCL and UPPCL for increasing the number of pockets/units under the escrow mechanism, the cashflows from this segment can see a sizeable uptick in the near term. This will boost the overall cash flows and thus the debt service coverage for the company.
Moderate DSCR The average DSCR is likely to remain at about 1.3 times over the currency of the loans assuming no further prepayments. However company has demonstrated its propensity to prepay its loans using the bulk payments received from UPPCL against power sales. This could materially alter the debt service coverage parameters. The company has maintained its plant availability factor (PAF) around 85% over the past two years and is expected to remain at this level.
Weakness: High counterparty risk with delayed payment track record While, LPGCL has been receiving 45-50% of its monthly billing from escrow collection, the remaining payments which are paid directly by UPPCL, has been significantly delayed. Although LPGCL has received 95% of the due payments (excluding one-time payment of approx. Rs. 2200 crores) from UPPCL, the collection has been sporadic over the past two fiscals, leading to stretched liquidity in the past. Hence, any substantial build-up of receivables may weaken the credit risk profile and will be closely monitored.
Risks related to coal unavailability Increasing power demand has resulted in coal shortage in India with most thermal companies now operating with shortened coal inventory days. Although, the company can source coal from alternate sources with full cost pass through to UPPCL, a sustained shortage in coal availability could result in lower PAF levels which could impact the billing and hence cash flows. |
Liquidity: Adequate Liquidity is adequate with a DSRA of about Rs 600 crores which is equivalent to one quarter of debt obligations and moderate working capital limit utilisation of 57% for past 12 months ending March 2022. The escrow collections and available working capital limits will support the company to meet its operational expenses. Further, as the company has already prepaid its principal obligations till December 2022, it has remaining repayment obligation of Rs. 220 crore in fiscal 2023 and Rs. 896 crore in fiscal 2024. The company remains committed to use all such future bulk proceeds to prepay the debt obligations thereby staying ahead by about 4-6 quarters of maturing obligations in the near term. |
Outlook Stable CRISIL Ratings believes LPGCL's credit risk profile will remain stable with healthy business risk profile and moderate financial risk profile supported by adequate liquidity in the form of a DSRA and undrawn bank lines amidst steady realisations. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company LPGCL, a subsidiary of Bajaj Group is located in Lalitpur district (Near Jhansi – U. P.) headquartered in Noida Uttar Pradesh. It is a Supercritical Thermal Power Plant equipped with modern technologies and advanced automatic monitoring & control with high-efficiency ESP control to help reduce its carbon footprint. The full capacity of the plant is 3X660 MW i.e. 1980 MW which commenced operations in December 2016. |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 06-May-2022 in line with the lender-wise facility details as on 04-May-2022 received from the rated entity.
Criteria Details
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