| Powerlinks Transmission 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 AAA/Stable/CRISIL A1+’ ratings on the proposed bank facilities of Powerlinks Transmission Limited (PTL).
The ratings continue to reflect the company’s strong business risk profile, backed by stable revenue on account of an established track record of higher-than-normative line availability and assured sales under the transmission service agreement (TSA). The ratings also factor in timely collection of receivables under the point of connection (PoC) pool mechanism and the strong financial risk profile of PTL. These strengths are partially offset by exposure to operations and maintenance (O&M) risk associated with transmission assets. |
Key Rating Drivers & Detailed Description Strengths:
The transmission network of PTL is an integral part of the national power grid, as it connects the north-eastern and eastern regions of India with the northern region. Revenue derives stability from the TSA, which ensures payment of stipulated tariff subject to achievement of 98% line availability annually. If cumulative availability on an annual basis is below the normative availability, revenue reduces proportionately. Revenue is delinked from demand, supply and volatility in the price of electricity. Moreover, the reasons for a line becoming unavailable are easily rectifiable, which minimises outage time. Line availability has been well above 99.0% since commissioning, which is in sync with the sectoral average and is likely to be maintained at above 98% over the medium term. This ensures predictable cash accrual in the form of full recovery of fixed cost (including return on equity [RoE] of 15.5%). The TSA also provides additional revenue equivalent to 10% of the annual fixed cost (majoration factor).
Under the PoC pool mechanism, the central transmission utility (CTU) collects monthly transmission charges on behalf of all interstate transmission service (ISTS) licensees from the designated ISTS customers. All ISTS licensees are then paid their share of transmission charges from the centrally collected pool by the CTU. This method distributes the counterparty risks, as the risk of default or delay by a designated customer is shared by all ISTS licensees, in proportion to their share in the centrally collected pool.
PTL repaid all its debt in fiscal 2019 through internal accrual. No large, debt-funded capital expenditure (capex) is expected over the medium term. The networth was robust at over Rs 970 crore as on March 31, 2022. The company paid dividend of Rs 75 crore in fiscal 2022. It had liquid balance of above Rs 100 crore as on March 31, 2023, in the form of mutual funds, fixed deposits and cash. Full recovery of the fixed cost (including RoE and majoration factor) is expected to support steady cash inflow.
Weakness:
The company’s revenue and, consequently, debt repayment ability are subject to maintenance of the stipulated line availability. Hence, it is important that the line be maintained in a good condition, reducing the number of instances of tripping and outage and minimising the outage time. However, O&M activity is not technically challenging and is routine, and O&M expenses form a small portion of the company's revenue. Most ISTS licensees in India have a track record of maintaining line availability higher than the normative level. |
Liquidity: Superior PTL had above Rs 100 crore of cash and cash equivalents as on March 31, 2023. It repaid all its debt in fiscal 2019. Absence of any large, debt-funded capex and continued full recovery of cost should keep liquidity healthy over the medium term. |
Outlook: Stable PTL will maintain its strong business risk profile over the medium term, backed by healthy line availability and a supportive regulatory regime. The financial risk profile, too, will remain strong in the absence of any external borrowings or capex and with adequate liquidity. |
Rating Sensitivity factors Downward factors
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About the Company PTL is a transmission licensee, set up to construct and operate transmission lines associated with the Tala Hydroelectric Project in Bhutan, the east-north inter-connector and the northern region transmission system. The company was incorporated in 2003 as a joint venture between The Tata Power Co Ltd (CRISIL AA/Stable/CRISIL A1+), which owns 51% of the equity, and Power Grid Corporation of India Ltd (CRISIL AAA/Stable/CRISIL A1+), which owns the remainder. The 1,166-kilometre (km [2,332-circuit km]) transmission network of PTL is designed to transmit power at high voltages of 400 kilovolt, with capacity to carry up to 3,000 megawatt (MW) of power from Siliguri in West Bengal to Gorakhpur in Uttar Pradesh and 1,500 MW from Gorakhpur to Mandola in Uttar Pradesh. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| 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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Criteria Details
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