| Opg Power Generation Private Limited | ||||||
| Rating outlook revised to 'Negative'; 'CRISIL A+/Negative' assigned to Non Convertible Debentures; Provisional rating on NCDs Withdrawn | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| & A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI | ||||||
| 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 revised its rating outlook on the long-term bank facilities and Rs.200 crore of non-convertible debentures (NCD’s) of OPG Power Generation Private Limited (OPGPL) to 'Negative' from 'Stable' and reaffirmed the rating at 'CRISIL A+’. The short-term rating has been reaffirmed at ‘CRISIL A1'. Also, CRISIL Ratings has assigned its ‘CRISIL A+/Negative’ rating to Rs.50 crore on the proposed non-convertible debentures.. Further, CRISIL Ratings has withdrawn its ratings on the non-convertible debentures of Rs.50 crore of OPGPL at the company’s request. This is in line with the rating withdrawal policy of CRISIL Ratings.
The revision in outlook reflects weakening of business risk profile marked by consistent decline in revenues owing to lower PLF (Plant Load Factor), reduced contribution to the overall revenue from sale of power along with deteriorating operating margin. Lockdown imposed to curb the spread of Covid 19, volatile coal prices and stringent tariff of TANGEDCO, basis which tariff for GCC (Group Captive) players is decided, were few of the reasons which impacted both PLF as well as realization in the last two fiscals. Revenue in FY22 remained modest at Rs.989 crore while margin reduced from 26.5% to 14.8%. PLF continued to remain modest at less than 60% for the last two fiscals ended FY22. Going forward, increased power demand in domestic market and revised tariff rates are expected to support PLF levels. However, PLF, continued volatility in coal prices, revision in tariff would be be key rating monitorable in the next few quarters.
The ratings continue to reflect OPGPL's established market position and healthy execution capabilities in the thermal power generation business and its strong financial risk profile. These strengths are partially offset by susceptibility of margins to availability, prices of coal and foreign exchange rates and risks related to short term nature of power purchase agreements. |
Key Rating Drivers & Detailed Description Strengths: Established market position and healthy execution capabilities in the thermal power generation business: The projects, commissioned from 2010 to 2015, had average plant load factor (PLF) of 75 percent till fiscal 2020, indicating efficient operations. While PLF levels has declined in the last two fiscals in the range of 50-55% due to lockdowns imposed to curb the spread of Covid-19 and volatile coal prices, the same is expected to gradually improve backed by increasing power demand in domestic market and better tariffs. The company benefits from having large customer base of over 150 customers in the group captive consumer scheme, to whom around 334 MW is supplied and 80 MW to Tamil Nadu Generation and Distribution Corporation (TANGECO). The company has maintained strong track record in maintaining PLF levels, with adequate tariff covering all fixed and variable costs.
Strong financial risk profile: Financial risk profile is strong marked by a healthy capital structure and moderate debt protection metrics. The net worth is strong at Rs.1149.86 crore as on March 31, 2022, with a gearing of less than 1 time. With no major debt funded capital expenditure (capex) over the medium term, the capital structure shall remain comfortable over the medium term. Debt protection metrics are comfortable, marked by an interest coverage and net cash accrual to total debt ratio of over 2.70 times and 26 percent for fiscal 2022. Financial risk profile is expected to remain strong over the medium term backed by absence of debt funded capital expenditure and lower cost of debt over the medium term.
Weaknesses: Susceptibility of operating profitability to availability and prices of coal and to volatility in foreign exchange (forex) rates: Coal costs contributes to around 85 percent of the total cost of sales of OPGPL. The company's operating profitability is susceptible to the availability and volatility in the prices of coal. Impact of increase in coal costs in fiscal 2022 is likely to be mitigated by increase in tariff to the group captive consumers. Further since significant percentage of the coal is imported, the operating profitability is also susceptible to volatility in foreign exchange rates. This risk is partially mitigated by OPGPL’s hedging of almost 85-90 percent of its forex exposure from fiscal 2020 onwards. CRISIL Ratings believes that OPGPL's operating profitability shall remain susceptible to availability and prices of coal and to volatility in foreign exchange (forex) rates. |
Liquidity: Strong Average month-end bank limits have been sparsely utilized for the last twelve months ended June 2022 at less than 50%. OPGPL is expected to generate cash accrual of more than Rs.140 crore over the medium term the same is expected to remain sufficient against repayment obligations of less than Rs.100 crore. Further, Rs.200 crore bullet repayments of the outstanding NCD is due in June 2023. Healthy liquidity in the form of unencumbered cash and cash equivalents of more than Rs.270 crore as on 31st March 2022 is expected to be sufficient against this bullet repayment. Further, steady collections from both its group captive customers and TANGEDCO, provides sufficient cash flows to meet the operational requirements and to enhance the liquidity. CRISIL believes OPGPL’s liquidity shall remain strong over the medium term; However any financial support to group companies shall remain a key monitorable. |
Outlook: Negative CRISIL Ratings believes that OPGPL shall continue to benefit over the medium term from its established market position and strong execution capabilities. |
Rating Sensitivity Factors Upward factor
Downward factor
|
About the Company OPGPL was incorporated in 2005 as a Special Purpose Vehicle (SPV) promoted by OPG Power Ventures Plc (OPGPV), a company established in the Isle of Man with the objective of setting up and operating captive power plants in India. The company has four operative thermal power plants in Chennai aggregating to a capacity of 414 MW.
The company commissioned its first power plant, i.e. 77 MW coal based power plant under Phase-I, in April 2010 and a similar power plant under Phase-II in Oct 2012, at Gummidipundi near Chennai. Subsequently, the company commissioned its third power plant of 80 MW capacity under Phase-II (Expansion) in June 2013 at the same location and its fourth power plant of 180 MW capacity under Phase-III in May 2015. OPGPL shall be utilizing the proceeds of the issue of the proposed non-convertible debentures to retire its existing term debt. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Not issued
Annexure - Details of Rating Withdrawn
#Not issued |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 27-Sep-2022 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity.
Criteria Details
|