ICRA revises rating given to PTC India Fin’s NCD

The Government’s directive to Coal India 2015 could reduce the fuel supply concerns of some of PFS’ funded projects

August 29, 2012 3:58 IST | India Infoline News Service
ICRA has revised the rating assigned to the non-convertible debenture programme and the long term bank lines of PTC India Financial Services from ‘A+’ to ‘A’. The outlook on the long-term rating is ‘Stable’.

The revision in rating (assigned to the Rs. 7 billion non-convertible debenture programme and Rs. 4.25 billion long-term bank lines) factors in continued vulnerability of some of the PFS’ funded exposures considering the current policy stance, said an ICRA statement.

“The vulnerability is arising due to concern on gas/coal availability, lack of end-use Power Purchase Agreements (PPAs) in some of the PFS’ funded projects, higher counter-party risk arising due to weak financials of State power utilities,” said ICRA.
The revised ratings are supported by PFS’ parentage (60% owned by PTC India Limited, or PTC) and its strategic fit in PTC’s operations. The ratings also factor in PFS’ good capital structure, diversified funding profile, experienced management team and adequate profitability.

PFS, established with the mandate of providing financial services in the energy value chain, is likely to remain important for PTC in fulfilling its objective of offering complete energy solutions. This in turn is likely to ensure strong funding, management and operational support from PTC.

The Government’s directive to Coal India 2015 could reduce the fuel supply concerns of some of PFS’ funded projects, the agency said.

According to the Government’s directive Coal India has to commit minimum 80% coal supply to power plants that have entered into long-term power purchase agreements (PPAs) with power distribution companies that have been commissioned/would get commissioned on or before March 31, 2015.

ICRA, however, pointed out that some projects funded by PFS do not have end-use PPAs with power distribution companies which could impact their ability to get firm fuel linkage from Coal India. These projects are expected to get commissioned over the next 1-3 years, thus giving them time to enter into firm end-use PPAs.

Further, counterparty credit risk remains high for a number of PFS’ borrowers, given their exposure to State power utilities that have been reporting significant losses for quite some time.

During the April-June 2012 period, PFS reported a net profit of Rs. 230 million compared to Rs. 100 million in the year-ago period.

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