| Maithon Power Limited | ||||
| Long-term rating upgraded to 'CRISIL AA/Stable'; short term rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has upgraded its rating on the long-term bank facilities of Maithon Power Limited (MPL) to 'CRISIL AA/Stable' from 'CRISIL AA-/Positive'. The rating upgrade follows a similar rating action on MPL's parent, The Tata Power Co Ltd (Tata Power; 'CRISIL AA/Stable/CRISIL A1+'). |
| Analytical Approach |
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CRISIL has considered the standalone business and financial risk profiles of MPL. CRISIL has also considered the operational, managerial and financial support from the parent, Tata Power. |
| Key Rating Drivers & Detailed Description |
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Strengths * Availability-based tariff structure with regulated returns and adequate fuel security MPL has tied up its entire capacity of 1,050 MW through long-term power purchase agreements (PPAs) under the classic two-part tariff structure which allows full recovery of capacity charges if PAF is maintained over 85% on an annual basis. Also, energy charges are recovered at actuals. The company has a strong track record of maintaining PAF above normative levels, enabling complete recovery of all fixed costs, along with depreciation and a fixed return on equity of 15.5% as approved by the Central Electricity Regulatory Commission. The company should maintain similar PAF over the medium term, although adequate supply of domestic coal and timely replacement with import, when necessary, remain key monitorables. * Healthy financial risk profile MPL has healthy financial risk profile, with a strong DSCR. Earnings before interest, tax, depreciation and amortisation rose to Rs 886 crore in fiscal 2020 from Rs 795 crore in the previous fiscal. Debt has reduced over the years with repayment. Outstanding debt was Rs 2,074 crore at end of fiscal 2020. Term loan has over 50% repayment in fiscal 2021. However, the regulated returns and long-term PPAs of 25 years should help the company comfortably refinance the debt. Weaknesses * Moderate counterparty risk MPL faces the risk of delay in receipt of payments from counterparties. It has tied up capacity of 1,050 MW through long-term PPAs: 150 MW with Damodar Valley Corporation (DVC), 300 MW with Kerala State Electricity Board (KSEB) and 600 MW with Tata Power Trading Co Ltd (TPTCL), which has a long-term PPA of 300 MW each with West Bengal State Electricity Distribution Co Ltd (WBESDCL) and Tata Power Delhi Distribution Ltd (TPDDL). The counterparty risk remains moderate with TPTCL and KSEB availing of a rebate of 2.25% and payments from DVC received in 30-45 days. Receivables stood at 28 days as on March 31, 2020 (47 days as on March 31, 2019, and 41 days as on March 31, 2018). Though track record of timely payment by counterparties provides comfort, MPL remains exposed to the risk. * Delays in setting up logistical infrastructure MPL's logistical infrastructure has been progressively delayed because of issues regarding land acquisition. Coal is currently transported by road. The railway corridor is now expected to be completed by February 2021, and should improve freight efficiency, reduce cost and strengthen the company's position in the merit order. Timely completion of this capex along with regulatory approval for capex recovery would be a key monitorable. |
| Liquidity Strong |
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MPL has strong liquidity, with expected cash accrual of Rs 490-500 crore each in fiscals 2021 and 2022. Cash and liquid investment were Rs 444 crore as on September 30, 2020. MPL has access to fund-based limit (part of which is interchangeable with non-fund-based facilities) of Rs 475 crore, of which around Rs 460 crore was undrawn as on September 30, 2020. The company has debt repayments of Rs 813 crore and Rs 176 crore in fiscal 2021 and fiscal 2022. These are likely to be refinanced given the strength of underlying cash flows. |
| Outlook: Stable |
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The Stable outlook reflects expectation of steady accruals backed by long-term PPA. |
| About the Company |
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MPL is a joint venture of Tata Power (74%) and DVC (26%). The company has set up a 1,050 MW (2x525 MW) power plant at Maithon in Jharkhand. Unit 1 began commercial operations on September 1, 2011, and Unit 2 on July 24, 2012. The entire capacity has been tied up through long-term PPAs: 300 MW, which was tied up with DVC has now reduced to 150 MW, with the balance 150 MW being taken over by KSEB increasing the capacity tied up with the state electricity board to 300 MW; 600 MW is with TPTCL, which in turn has a long-term PPA of 300 MW each with WBESDCL and TPDDL. |
| Key Financial Indicators - (MPL standalone: CRISIL adjusted) | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels. |
| Annexure - Details of Instrument(s) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
^One way interchangeability to fund-based limit to the extent of Rs 25 crore |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
^One way interchangeability to fund-based limit to the extent of Rs 25 crore | ||||||||||||||||||||||||||||||||||||||||||||||||
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