Rating Rationale
October 31, 2023 | Mumbai
PTC Energy Limited
Long term rating placed on 'Watch Positive'; Short-term rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.2075 Crore
Long Term RatingCRISIL A/Watch Positive (Placed on ‘Rating Watch with Positive Implications’)
Short Term RatingCRISIL A1 (Reaffirmed)
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 placed its rating on the long-term bank facilities of PTC Energy Ltd (PEL) on ‘Rating Watch with Positive Implications’. The rating on the short-term bank facilities has been reaffirmed at ‘CRISIL A1’.

 

The rating action follows an announcement by PTC India Ltd (PTC; ‘CRISIL A1+’) on October 19, 2023, regarding approval of bid submitted by Oil and Natural Gas Corporation Ltd (ONGC) for acquisition of 100% stake in PEL at equity value of Rs 925 crore. The transaction is subject to customary conditions precedent, including receipt of regulatory and approval of shareholders of PTC, and is expected to conclude in fiscal 2024.

 

The ratings factor in expectation of continued operational and managerial support to PEL upon completion of the transaction from the new parent, ONGC, which has a strong credit risk profile. That said, any change in articulation of support post completion of the transaction will be a key rating sensitivity factor. CRISIL Ratings will continue to monitor the transaction and will remove the rating from positive watch and take final rating action following conclusion of the transaction.

 

The ratings continue to reflect the strong operational and managerial support received by PEL from its existing parent, PTC, and the low offtake risk. These strengths are partially offset by exposure to counterparty risk and to inherent risk of variability in wind speed and pattern.

Analytical Approach

CRISIL Ratings has factored support from the parent, PTC, as PEL is a wholly owned subsidiary. The company receives need-based operational, managerial and financial support from the parent.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong financial, operational and managerial support from the parent: PEL benefits from the leading position of PTC in the domestic power trading segment and its strong market linkages and sectorial expertise. PTC extended corporate guarantees for working capital lines of Rs. 200 crore and Rs. 75 crore, under PEL in fiscal 2022 and 2023, respectively.  Also, PTC infused equity of around Rs 600 crore in PEL until fiscal 2017 to fund 288.8 MW wind energy projects. CRISIL Ratings expects PEL to receive similar operational and managerial support from the new parent, ONGC, upon completion of the transaction. Change in stance of support from the parent will be a key monitorable.

 

  • Low offtake risk: The entire operational capacity of 288.8-MW is tied up through long-term power purchase agreements (PPAs) with the distribution companies (discoms) of Madhya Pradesh, Andhra Pradesh and Karnataka (25 years, 25 years and 20 years, respectively).

 

Weaknesses:

  • Exposure to inherent risk of variability in wind speed and pattern: Variation in wind speed and pattern may lead to low operating plant load factor (PLF), and thus, impair cash flow. Though PLF was constrained because of stabilization and technical reasons in the initial years, low wind speed resulted in lower than P90 PLF in fiscals 2022 and 2023. However, liquidity cushion in the form of debt service reserve account (DSRA) and need-based support from PTC mitigates this risk.

 

The company has been relying on working capital limit and internal cash accrual or cash balance to service debt and thus has been impacted by weaker operating performance and collection. The operational performance of the projects and their impact on cash flow will remain key monitorables.

 

  • Exposure to counterparty risk: Cash flow remains susceptible to delay in payments by counterparties, given their weak credit risk profiles. In the past, payments from the discoms of Madhya Pradesh and Karnataka, though delayed, were received at regular intervals. In case of Andhra Pradesh, there was uncertainty over the stance of Andhra Pradesh Electricity Regulatory Commission on review of the PPA tariff. After the High Court of Andhra Pradesh order in October 2019 related to PPA tariff renegotiation for wind and solar power projects, the Andhra Pradesh discom has been paying Rs 2.43 per unit for past dues. This, along with delays from other state discoms, led to an increase in receivables. However, in March 2022, the High Court vide its order directed state discoms to honour the terms of the signed PPAs and clear pending dues as per the tariff agreed under the PPA within six weeks. The payment has not been made, but the state discom has started paying instalments under the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. This resulted in improvement in receivables to Rs 237 crore as of September 2023 from Rs 341 crore as of December 2022 (Rs 453 crore as of March 2022). Further, receipt of pending instalments in the coming months will help improve receivables. However, owing to the weak financial position of the counterparties, timely collection of dues will remain a key monitorable.

Liquidity: Adequate

The company has a DSRA of six months of debt obligation for 209.3 MW and DSRA of three months for the remaining 79.5 MW. As on September 30, 2023, PEL had maintained DSRA of Rs 104 crore (Rs 70 crore in form of fixed deposits and Rs 34 crore in form of Bank guarantee). In addition, cash and equivalent including bank balance and deposits stood at Rs 121 crore. Internal accrual, unutilized bank limit and cash and equivalent will adequately cover debt obligation. Timely collection and reduction in receivables from all counterparties, leading to recouping of liquidity, is a key monitorable.

Rating Sensitivity factors

Upward factors:

  • Steady improvement in operating performance with PLF around P90 level, strengthening the debt protection metrics
  • Decline in receivables leading to significant improvement in liquidity

 

Downward factors:

  • Stretch in receivables weakening liquidity
  • Lower operating performance because of wind variations or other factors, constraining the cash flow
  • Downward revision in the credit rating of, or change in stance of support from, the parent, with reduction in ownership of PEL below 50%

About the Company

PEL is a wholly owned subsidiary of PTC. The company has aggregate capacity of 288.8 MW of operational wind power assets, of which 50 MW each is in Madhya Pradesh and Karnataka and 188.8 MW in Andhra Pradesh.

 

For the first quarter of fiscal 2024, PEL reported operating income of ~Rs 90 crore and profit after tax (PAT) of ~Rs 16 crore, as against ~Rs 86 crore and ~Rs 11 crore during the corresponding period of the previous fiscal.

About the Group

PTC India was incorporated in 1999 to support implementation of the mega power policy of the Government of India. NHPC Ltd, NTPC Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), Power Finance Corporation Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) and Power Grid Corporation of India Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) are the promoters of PTC India. The company has a category I licence, which permits unlimited trading in power, issued by the Central Electricity Regulatory Commission (CERC) under the Electricity Act, 2003. It is the largest player in the power trading market, with share of over 35% in fiscal 2023. PTC India traded 71 billion units in fiscal 2023 (87 billion units in fiscal 2022).

Key Financial Indicators*

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

297

281

Profit after tax (PAT)

Rs crore

14

-2

PAT margin

%

4.7

-0.9

Adjusted debt / adjusted networth

Times

1.8

2.1

Interest coverage

Times

1.8

1.7

*As per analytical adjustments made by CRISIL Ratings

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

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.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Long-term loan NA NA Sep-33 1622.45 NA CRISIL A/Watch Positive
NA Proposed long-term bank loan facility NA NA NA 47.55 NA CRISIL A/Watch Positive
NA Working capital demand loan NA NA NA 105 NA CRISIL A1
NA Short-term loan@ NA NA NA 20 NA CRISIL A1
NA Short-term loan NA NA NA 200 NA CRISIL A1
NA Bank guarantee NA NA NA 30 NA CRISIL A1
NA Line of credit NA NA NA 50 NA CRISIL A1

@One-way interchangeable with bank guarantee

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 2045.0 CRISIL A/Watch Positive / CRISIL A1 02-02-23 CRISIL A1 / CRISIL A/Stable 20-09-22 CRISIL A/Negative / CRISIL A1 29-10-21 CRISIL A1 / CRISIL A/Stable 31-03-20 CRISIL A1 / CRISIL A/Stable CRISIL A1 / CRISIL A/Stable
      -- 30-01-23 CRISIL A1 / CRISIL A/Stable 19-09-22 CRISIL A/Negative / CRISIL A1 06-01-21 CRISIL A1 / CRISIL A/Stable 25-02-20 CRISIL A1 / CRISIL A/Stable --
      --   -- 31-01-22 CRISIL A1 / CRISIL A/Stable   --   -- --
Non-Fund Based Facilities ST 30.0 CRISIL A1 02-02-23 CRISIL A1 20-09-22 CRISIL A1 29-10-21 CRISIL A1 31-03-20 CRISIL A1 CRISIL A1
      -- 30-01-23 CRISIL A1 19-09-22 CRISIL A1 06-01-21 CRISIL A1 25-02-20 CRISIL A1 --
      --   -- 31-01-22 CRISIL A1   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 30 ICICI Bank Limited CRISIL A1
Line of Credit 50 Bank of Baroda CRISIL A1
Long Term Loan 80.15 ICICI Bank Limited CRISIL A/Watch Positive
Long Term Loan 53.43 India Infrastructure Finance Company Limited CRISIL A/Watch Positive
Long Term Loan 82.92 ICICI Bank Limited CRISIL A/Watch Positive
Long Term Loan 75 PTC India Financial Services Limited CRISIL A/Watch Positive
Long Term Loan 27.8 State Bank of India CRISIL A/Watch Positive
Long Term Loan 86.63 REC Limited CRISIL A/Watch Positive
Long Term Loan 259 State Bank of India CRISIL A/Watch Positive
Long Term Loan 36.9 IndusInd Bank Limited CRISIL A/Watch Positive
Long Term Loan 55.42 IndusInd Bank Limited CRISIL A/Watch Positive
Long Term Loan 79.16 Bank of India CRISIL A/Watch Positive
Long Term Loan 98.69 The South Indian Bank Limited CRISIL A/Watch Positive
Long Term Loan 74.02 India Infrastructure Finance Company Limited CRISIL A/Watch Positive
Long Term Loan 49.34 Bank of India CRISIL A/Watch Positive
Long Term Loan 97.1 Tata Cleantech Capital Limited CRISIL A/Watch Positive
Long Term Loan 48.55 The South Indian Bank Limited CRISIL A/Watch Positive
Long Term Loan 163.29 Aditya Birla Finance Limited CRISIL A/Watch Positive
Long Term Loan 55.42 Canara Bank CRISIL A/Watch Positive
Long Term Loan 55.42 Central Bank Of India CRISIL A/Watch Positive
Long Term Loan 74.21 Punjab National Bank CRISIL A/Watch Positive
Long Term Loan 70 ICICI Bank Limited CRISIL A/Watch Positive
Proposed Long Term Bank Loan Facility 47.55 Not Applicable CRISIL A/Watch Positive
Short Term Loan 200 ICICI Bank Limited CRISIL A1
Short Term Loan& 20 ICICI Bank Limited CRISIL A1
Working Capital Demand Loan 105 The Federal Bank Limited CRISIL A1
& - One-way interchangeable with bank guarantee
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Power Generation Utilities
Criteria for rating wind power projects
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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