| MB Power (Madhya Pradesh) Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB+/Stable/CRISIL A2’ ratings on the bank facilities of MB Power (Madhya Pradesh) Limited (MBPL).
CRISIL Ratings has also withdrawn its rating on Rs 274.02 crore of long term bank loan facilities upon request from the entity and receipt of requisite documentation in line with the withdrawal policy of CRISIL Ratings.
The ratings continue to consider the healthy business risk profile of MBPL, aided by low risks of offtake and fuel availability, and its track record of steady operations. These strengths are partially offset by the constrained capital structure of the company and the weak financial risk profiles of its counterparties.
CRISIL Ratings notes that the promoter, Mr Ratul Puri has resigned from the board of directors in September 2021. However, he continues to remain on the board of the ultimate parent i.e. Hindustan Power Projects Pvt Ltd (HPPPL). Meanwhile, investigations by various agencies into matters related to the promoter are underway and any adverse development in the matter, which could have a material impact on the credit risk profile, is a key monitorable. |
Key Rating Drivers & Detailed Description Strengths:
Of the total capacity of 1,200 megawatt (MW), 67% is tied up under long-term PPAs with Madhya Pradesh Power Trading Corporation Ltd (MPPTCL) and Uttar Pradesh Power Corporation Ltd. (UPPCL), 13% is tied up under a medium-term PPA with Haryana discom, and the balance is sold on a merchant basis. The PPA with MPPTCL (30% of capacity) is under a cost-plus structure, which allows full recovery of cost, including a 15.5% return on equity. The one with UPPCL (32% of capacity) is under the case 1 bidding structure. The medium-term PPA of 150 MW with the Haryana discom has already commenced and shall be valid for the next three years. This new PPA has effectively replaced the old PPA (through PTC India Ltd; rated CRISIL A1+), which expired in March 2022.
The FSA with South Eastern Coal Fields Ltd lowers fuel availability risk for power generation under PPAs and fulfils a major portion of the requirement. Furthermore, purchase of coal through the LC mechanism reduces the carrying cost.
The project has maintained an overall PAF of over 88% in the three fiscals through March 2022 and around 100% during the first five months of current fiscal, which exceeded the normative level (85%) and ensures recovery of capacity charges under PPAs. The plant load factor (PLF) remained at around 63% and 73% during fiscal 2021 and 2022 respectively and continue to remain at healthy level in current fiscal. Given the adequate fuel tie-up, the plant may continue to achieve higher-than-normative PAF and sustain a healthy PLF over the medium term.
Weaknesses:
Total debt (including the outstanding fund-based working capital limit) to earnings before interest, tax, depreciation and amortisation (EBITDA) and gearing ratios stood at 4.5 and 3.2 times, respectively, as on March 31, 2021, and adjusted interest coverage was 1.9 times in fiscal 2021. Fiscal 2022 financials are yet to be finalised. The capital structure and debt protection metrics should remain at modest levels over the medium term considering the debt-funded capital expenditure (capex) towards the upcoming FGD (flue gas desulphurisation) though it will be partly offset by scheduled repayment of the long-term debt. Realisation of pending energy dues from counterparties may help liquidity improve over the medium term. Any sharp weakening of the capital structure and liquidity remain a key rating sensitivity factor.
While overall receivables moderated to 94 days as on March 31, 2021, from 183 days a year before, mainly due to realisations under the Atmanirbhar Bharat Package, receivables were steady around 90 days as on June 30, 2022. MBPL continues to receive timely cash flow for regular energy bills under PPAs with discoms of Uttar Pradesh, Madhya Pradesh and Haryana. Receivables may decline in the medium term as most of the counterparties have already started making payments under new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. However, any change in receivables or liquidity position will remain a key rating sensitivity factor. |
Liquidity: Adequate Liquidity is marked by moderate utilisation of fund-based working capital limits averaging 40% for the 12 months through July 2022. The total sanctioned fund-based limit as of July 2022 is Rs 901 crore. MBPL is also maintaining a debt service reserve obligation (DSRA) equivalent to six months of debt (around Rs 446 crore). MBPL has received the balance insurance claim proceeds of around Rs 84 crore in March 2022. Annual cash accrual and unutilised bank lines should suffice to meet the debt obligation, capex towards the FGD project and any incremental working capital requirement during fiscal 2023. Sustenance of liquidity will remain closely monitored. |
Outlook: Stable The business risk profile of MBPL should remain healthy over the medium term, backed by its steady operational performance. Adequate liquidity, in the form of a DSRA and undrawn bank lines along with stable realisations, support the financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MBPL is a subsidiary of Hindustan Thermal Projects Ltd (HTPL), which, in turn, is a subsidiary of HPPPL (flagship entity of the Hindustan Power group, promoted by Mr Ratul Puri). The company is majorly held by HTPL (around 80%) with the balance being held by SBI Macquarie Infrastructure Investments PTE Ltd.
The company has set up a 2x600 MW coal-based sub-critical thermal power plant in the Anuppur district of Madhya Pradesh. Unit I (600 MW) was commissioned on April 20, 2015, and Unit II (600 MW) on March 30, 2016. However, Unit II was shut down in May 2016, following a boiler accident and was recommissioned in May 2017. The project was originally appraised at Rs 6,240 crore, which was revised to Rs 8,000 crore. Daily operations are managed by a team of professionals having over two to three decades of experience in the power sector. The company has been servicing debt regularly. |
Key Financial Indicators*
*As per analytical adjustments made by CRISIL Ratings; fiscal 2022 financials have not yet been finalized. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: 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. For more details on the CRISIL Ratings’ complexity levels please visit www.crisil.com/complexity-levels. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
**Equivalent to USD 100.86Mn - converted as per hedging contract at average Rate of Rs.67.80 per USD @For LC Interchangeability of Rs 500 crore from FBWC allowed *For CD/ ED %Sanctioned #For PPA/ FSA ^New FGD long term bank loan facility |
| 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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This Annexure has been updated on 20-Oct-22 in line with the lender-wise facility details as on 18-Aug-21 received from the rated entity.
**Equivalent to USD 100.86Mn - converted as per hedging contract at average Rate of Rs.67.80 per USD
@For LC Interchangeability of Rs 500 crore from FBWC allowed
*For CD/ ED
%Sanctioned
#For PPA/ FSA
^New FGD long term bank loan facility
Criteria Details
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