| ONGC Tripura Power Company Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities and commercial paper programme of ONGC Tripura Power Company Limited (OTPC).
The ratings continue to factor in the strong business risk profile of OTPC, driven by the take-or-pay nature of its power purchase agreements (PPAs); its competitive advantage because of gas supply from the largest shareholder, Oil and Natural Gas Corporation Ltd (ONGC), on a firm-price basis; and operational and managerial support from the latter. These strengths are partially offset by the lower-than-normative plant availability factor (PAF), impacting full recovery of the approved project cost, and exposure to weak counterparties. |
Analytical Approach CRISIL Ratings continues to use its parent notch-up framework to factor in the support available to OTPC from ONGC. The business and financial risk profiles of OTPC and its joint venture company, North-East Transmission Co Ltd (NETCL), have been combined moderately as the debt is non-recourse and no further equity support is expected.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong business risk profile: OTPC has signed PPAs with distribution companies (discoms) of north-eastern states for ~683 megawatt (MW), covering 94% of its total capacity. The PPAs, valid for 25 years from the date of commencement of commercial operations, are based on the classic two-part tariff structure of the Central Electricity Regulatory Commission (CERC), which ensures complete recovery of approved fixed cost, including debt servicing, and a fixed return on equity of 15.5%, subject to the plant meeting a normative PAF of 85%. Power generated from the remaining 43 MW (6%) capacity is sold through exchanges and bilateral arrangements.
Competitive advantage because of gas supply from ONGC: OTPC has signed a gas sale-and-purchase agreement with ONGC that meets its fuel requirement for 15 years, with a provision to extend by two 5-year terms. Not only does this insulate OTPC from fuel risk, but the supply of gas at a firm price with escalation of 4% every year, also ensures a competitive tariff over the long term.
Financial and managerial support from ONGC: OTPC is an initiative of ONGC for the monetisation of its unutilised stranded gas reserves in Tripura. Besides being the gas supplier to the project, ONGC is the largest shareholder (50% stake) in OTPC. Of the 11-member board of directors of OTPC, four are representatives of ONGC, including the chairperson. Significant control of ONGC and the strategic importance of OTPC underscore the parent’s economic rationale and moral obligation to support the latter.
Weaknesses: Lower than-normative, PAF, resulting in under-recovery of project cost: OTPC’s plant requires about 2.9 million metric standard cubic metre per day (mmscmd) of gas to run at the normative PAF of 85% to ensure full recovery of cost. The plant had been running on lower PAF (less than 85%) due to inadequate gas supply. PAF declined to ~71% during fiscal 2024, from 78% in fiscal 2023. While the PAF declined further to 58% in Q1 of fiscal 2025, it is expected to improve and cross 65-70% PAF by December 2024 as per the discussion with the management. While there will be under-recoveries in cost, the debt service coverage ratio (DSCR) should remain comfortable over the medium term. However, any significant change in the gas supply or technical issues impacting the PAF are key rating sensitivity factors.
Exposure to weak counterparties: OTPC sells power to discoms having weak credit risk profiles and faces the risk of delay in payments. However, being one of the lowest-cost power producers in the region, the company ranks high in the merit-order dispatch of these discoms, which ensures timely payment. Receivables (excluding unbilled revenue) sustained at 49 days as on March 31, 2024, compared to 48 days on March 31, 2023. Receivables are expected to sustain over the medium term driven by timely payment by discoms and the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. A revolving letter of credit mechanism and option to sell power through exchange, if discoms default on payment, support the ratings. Nonetheless, timely receipt of dues will remain a key monitorable. |
Liquidity: Strong Liquidity is supported by cash and bank balance of Rs 5 crore and unutilised bank lines of Rs 200 crore as on March 31, 2024. Utilisation of the fund-based bank limit of Rs 300 crore (including commercial paper) was 12%, on average, over the 12 months through June 2024. Existing liquidity and expected annual cash accruals should be adequate to meet the debt obligation for fiscal 2024. Moreover, being part of ONGC gives OTPC easy access to low-cost financing from banks. |
Outlook: Stable Sustainable gas supply, amid healthy machine availability and continued timely payments by counterparties, should help maintain the credit risk profile of OTPC over the medium term. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company OTPC, a joint venture of ONGC, GAIL (India) Ltd and the Government of Tripura, has a 726.6 MW (2x363.3 MW) combined cycle gas turbine power project in Palatana, Tripura. ONGC holds 50% of the equity shares, with GAIL (India) Ltd owning 26% and the Government of Tripura 0.5%. GAIL (India) Ltd acquired its stake from IL&FS Energy Development Company Ltd (IEDCL) in January 2022. The promoters have arranged for the balance equity funding through India Infrastructure Fund-II (IIF-II), which holds 23.5% share in OTPC.
The project cost of OTPC was revised from Rs 3,420 crore to Rs 4,047 crore due to a delay in implementation. The project has been funded through debt and equity in a mix of 75:25. The first unit began commercial operations on January 4, 2014, and the second on March 24, 2015. OTPC supplies 94% of the power produced to north-eastern discoms and sells the rest on exchanges.
Power from the project site switchyard is evacuated through a 661-kilometre, 400-kilovolt (kV) double circuit transmission line established from Palatana (generation switchyard) to the 400-kV DC Bongaigaon substation of Power Grid Corporation of India Ltd (PGCIL; 'CRISIL AAA/Stable/CRISIL A1+'). The transmission line has been implemented by NETCL at a cost of Rs 2,057 crore (funded in a debt-equity mix of 80:20). NETCL is a joint venture of OTPC (shareholding of 26%), PGCIL (26%), and north-eastern state governments (48%). |
About ONGC ONGC is India's largest exploration and production company. It explores, develops and produces crude oil and natural gas in India and abroad. The company functions under the administrative control of the Ministry of Petroleum and Natural Gas; the government held 58.89% of the company’s equity capital as on June 30, 2024.
For fiscal 2024, ONGC, on a consolidated basis, had a profit after tax of Rs 57,101 crore and total income of Rs 6,55,259 crore, against Rs 49,294 crore and Rs 5,39,199 crore, respectively, for the previous fiscal. |
Key Financial Indicators Indicators for OTPCL*
*As per analytical adjustments made by CRISIL Ratings |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangable between fund based and non fund based limits |
Annexure - List of Entities Consolidated
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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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Criteria Details
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