| NTPC Green Energy Limited | ||||||
| ‘CRISIL AAA/Stable/CRISIL A1+’ assigned to Bank Debt | ||||||
| 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 assigned its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings to the proposed bank facilities of NTPC Green Energy Limited (NGEL).
NGEL was incorporated in April 2022 as a wholly owned subsidiary of NTPC Ltd (NTPC; rated CRISIL AAA/Stable/CRISIL A1+) to develop the renewable energy (RE) assets and meet NTPC’s overall RE target of 60 giga-watt (GW) capacity by 2032. Currently, NTPC has operational RE assets of ~ 3.1 GW and also has a wholly owned subsidiary named NTPC Renewable Energy Ltd (NTPC REL) having ~4.3 GW of RE assets won under various tariff based competitive bidding (TBCB) tenders. The company is planning to add merchant capacity apart from capacity addition under partnership with C&I customers including central public sector entities (CPSEs) aggregating ~3-4 GW in the medium term. CRISIL Ratings understands that going forward, NGEL will act as a holding cum operating company for the RE assets and all the capacity additions in the RE segment will be carried out within or under NGEL. As a part of consolidation, NTPC REL will become a wholly owned subsidiary of NGEL and ~2.861 GW (2.561 GW operational and 0.3 GW near-commercialization) of standalone RE assets of NTPC will be transferred to NGEL. Business transfer of standalone RE assets of NTPC and share purchase agreement of NTPC REL were executed in July 2022 and is expected to be completed very soon.
The ratings reflect the high strategic importance of NGEL to, and strong financial and managerial linkages with NTPC; diversified portfolio; and low offtake risk due to long term PPAs, resulting in a healthy DSCR (debt service coverage ratio). These strengths are partially offset by the weak credit risk profiles of some of the counterparties and susceptibility to implementation risk owing to large capital expenditure (capex) plans. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of NGEL, NTPC REL and all its subsidiaries. CRISIL Ratings has also applied its parent notch-up framework to factor in support from NTPC due to the strategic importance of NGEL to NTPC and the strong financial, operational, and managerial linkages of NTPC with NGEL.
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 Strength High strategic importance to, and strong financial and managerial linkages with, NTPC NTPC has experience in operating and maintaining power stations at par with the best-run utilities in the world, with respect to availability, reliability and efficiency. It is a dominant player in the domestic power sector, apart from having a robust financial risk profile and track record of providing timely support to subsidiaries. While NTPC has existing renewable energy asset base of ~ 3.1 GW but it has plans to increase total renewable energy capacity (through NGEL) to 60 GW by 2032, which will mainly be carried out through NGEL and NTPC REL. Further, the board of NGEL consists of NTPC personnel and also the key management positions are from NTPC. Additionally, strong parentage of NTPC provides benefits of high project execution capabilities and timely realisation of receivables, driven by strong market position in the power sector. While NTPC is looking to monetise its shareholding in NGEL (proposed platform for renewable business for NTPC) to support future growth plans of renewable business, however NTPC will control NGEL while maintaining majority holding. CRISIL Ratings understands NTPC shall provide need-based growth and distress support to NGEL.
Well–diversified portfolio and low offtake risk along with healthy DSCRThe assets are diversified into solar and wind with presence in multiple locations in more than six states. This helps mitigate the risk of location-specific generation variability. Moreover, all the tied up projects have a tenure of 25 years with a fixed tariff, leading to high revenue visible. The operating renewable assets witnessed an adequate average plant load factor (PLF) of 20.5% in fiscal 2022, however sustenance of healthy PLFs will be a key montorable. Sustenance of operating performance is expected to support comfortable consolidated average DSCR for the portfolio.
Weaknesses Weak credit risk profile of the counterparties Long-term power purchase agreements (PPAs) with distribution companies (discoms) having relatively weaker financial risk profiles and payment track record pose receivables risk. While receivables for operational renewable assets stood at ~66 days as on March 31, 2022, the weak financial health of state discoms could lead to further stretch in payments, thereby constraining the standalone credit risk profile of NGEL. However, the discoms have started making payments under the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. This risk is also mitigated by diversity in counterparties with presence of over six state discoms and CPSEs in the portfolio, and benefits of being a part of the NTPC group. Payment security mechanisms such as letters of credit also lend comfort.
Susceptibility to implementation risk owing to large capex plans Company has large capex plans to reach an overall capacity of 60 GW by 2032 from around 3 GW currently. Currently, ~4 GW of capacity is under construction and for ~ 1 GW, the construction is yet to begin. The company is exposed to time and cost overrun in these under-construction assets. The company executes projects primarily through the EPC (engineering, procurement, and construction) route and has provisions for getting liquidated damages for delays in commissioning. However, it remains exposed to increase in costs for projects not yet awarded. Nonetheless, CRISIL Ratings draws comfort from the strong track record of NTPC. NGEL is likely to fund the new projects in a debt-equity ratio of 80:20. The company has equity commitment from NTPC and is also expected to receive funds from the dilution of minority stake by NTPC. |
Liquidity: Superior Liquidity is driven by annual cash accrual of the operational RE assets, which is adequate to meet debt obligation during fiscal 2024. The company is expected to avail of fund-based limit of Rs 1,000-1,500 crore, which will be adequate to meet working capital requirement over the medium term. The management intends to build and maintain liquidity (cash and unutilized fund-based bank lines) of at least one quarter of debt servicing requirement over the medium term. Being a subsidiary of NTPC also adds to its ability to raise funds. |
Outlook: Stable NGEL will benefit from its strategic importance to NTPC. The ability to generate steady cash accrual on the back of a diversified portfolio and long-term PPAs will continue to support credit risk profile. |
Rating Sensitivity factors Downward factors
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About the Company NGEL was incorporated in April 2022 as a wholly owned subsidiary of NTPC for consolidation of identified RE assets of NTPC along with NTPC REL. NTPC REL is currently a wholly owned subsidiary of NTPC. The identified RE assets of NTPC constitute 2.861 GW capacity, of which 2.561 GW is in operation while the remaining 0.3 GW is near commercialisation. NTPC REL has RE assets of ~ 4.3 GW won under various TBCB tenders. Business transfer of RE assets and share purchase agreement of NTPC REL were executed in July 2022. |
Key Financial Indicators*
* The company was incorporated in April 2022 |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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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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This Annexure has been updated on 08-Feb-2023 in line with the lender-wise facility details as on 08-Feb-2023 received from the rated entity.
Criteria Details
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