| Sandhya Hydro Power Projects Balargha Private Limited | ||||
| Rating placed on 'Watch Developing' | ||||
| 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 placed its rating on the long-term bank facilities of Sandhya Hydro Power Projects Balargha Private Limited (SHPPBPL) on ‘Rating Watch with Developing Implications’.
The rating action follows the shutdown of operations of the 9-megawatt (MW) hydropower plant of the company on the Parbati river (in the Kullu district of Himachal Pradesh), on July 9, 2023, following heavy rainfall and surge in water flow in the project area coupled with damage to the power evacuation infrastructure. Further, given the significant damage caused to the road infrastructure around the project area and continuing surge in water flow, the company is yet to fully assess the condition of its power plant. Furthermore, transmission infrastructure needs to be restored for power evacuation to commence. CRISIL Ratings will keep a close watch on further developments and obtain better clarity on the status of the plant and timeline to resume operations, while ascertaining the impact on the business and financial risk profiles of SHPPBPL.
As on date, the company has cash and equivalents of Rs 4.5 crore (including debt service reserve account [DSRA] of Rs 3 crore) against monthly debt obligation of Rs 1 crore. CRISIL Ratings understands that the company has a comprehensive insurance policy amounting to Rs 105 crore along with loss of profit claim of Rs 28 crore. Also, as on date the total external debt outstanding is Rs 63 crore. Further, CRISIL Ratings understands that the promoters have sufficient wherewithal to infuse liquidity and support the company in case of any distress that may arise due to timing mismatch of cash flow. Any deviation in this understanding or significant mismatch in cash flow timing will be a key rating sensitivity factor. Also, the lender is in the process of evaluating the situation and its potential impact on the project. Any action of the lender in the context of the situation will be a key monitorable.
The rating continues to factor in low offtake risk with the entire exportable capacity fully tied up with group captive (GC) consumers. The offtakers include Bharti Airtel Ltd (Airtel; ‘CRISIL AA+/Stable/CRISIL A1+’) and a clutch of Delhi-based hospitals and hotels with healthy credit risk profiles, along with a track record of timely payments. The rating drives comfort from the potential for generation, as indicated by long-term historical water flow data.
These strengths are partially offset by moderate liquidity, with the company having sufficient liquidity to meet its near-term debt obligation. The Rs 5 crore incentive to be received from the state government of Himachal Pradesh is expected to shore-up liquidity in the near term, however, the timing of receipt of the incentive is a key monitorable. Furthermore, the company remains exposed to hydrology-related risks.
In fiscal 2023, plant load factor (PLF) stood at 74.8% (calculated on plant capacity of 9 MW), which was lower as compared to 80.6% in fiscal 2022. This was owing to low water flow during December 2022 and January 2023. Further, in the first three months of fiscal 2024, PLF stood at 79.4% compared to 90.3% seen in the first quarter of fiscal 2022, owing to weak water flow in April 2023 due to delayed snow fall. Generation subsequently improved in June 2023 generation and was in line with levels seen in the previous few fiscals.
Going forward, shift to the 132-kilovolt (kV) transmission line of Himachal Pradesh Power Transmission Corporation Ltd (HPPTCL) is expected to result in lower losses for the company from the current levels and, resultantly, higher cash flow. Operationalisation of the line has been delayed and is now expected by September 2024 (earlier expected by the first half of fiscal 2024). |
Analytical Approach SHPPBPL has been assessed as a standalone entity. |
Key Rating Drivers & Detailed Description Strengths: Healthy counterparty mix The company has tied up the entire exportable capacity with GC customers that have long-term power purchase agreements (PPAs) of 12-15 years at an average tariff of Rs 5.5 per unit. The counterparty mix includes Airtel, with an offtake share of nearly 30%, and the remaining comprises Delhi-based hospitals and hotels with healthy credit risk profiles. This is also reflected in the stable payment cycle for the past 15 months, with most payments received within 30 days. Furthermore, competitive project tariff in comparison with commercial grid tariff provides healthy economic viability to buyers. Any change in tariff viability will remain a rating sensitivity factor.
Healthy generation potential of the project despite lower-than-expected PLF in fiscal 2023 In fiscal 2023, PLF stood at 74.8%, lower as compared to 80.6% in fiscal 2022. Despite being run-of-the-river, the project is not entirely dependent on the monsoon, as it is located on the perennial Parbati river in Himachal Pradesh. Data of over three decades indicates adequate water flow, supporting the project's healthy generation potential even during the lowest water flow observed over this period. Resultantly, PLF is expected to sustain at around 85% over the medium term; however, generational levels will remain a key monitorable.
Generation is expected to be impacted in the near term due to the temporary shutdown of the plant owing to disruptions caused by heavy rainfall in July 2023. CRISIL Ratings understands that the company has taken insurance to cover for cash flow in such cases, which should cover for any loss of generation. However, timing and receipt of these proceeds will be a key monitorable.
Connectivity to 132-kV evacuation system – though delayed – to support liquidity The company is currently using the 33-kV system of Himachal Pradesh State Electricity Board (HPSEB), resulting in transmission losses of nearly 8.5% in addition to lower plant availability and penal charges for frequent failures in the HPSEB grid. SHPPBPL has signed a connectivity agreement with HPPTCL to connect to the latter’s upcoming 132-kV transmission line, which would provide permanent evacuation infrastructure to the project. Shift to this new line will result in reduction in transmission losses, lower charges and higher plant availability given the stability of the high voltage line. The line was earlier expected to be operational by the first half of fiscal 2024, however, has been seeing delays. It is now expected to be operational by September 2024 and commissioning of it will remain a key monitorable.
Weaknesses: DSRA equivalent to six months of debt obligation yet to be created As per lending terms, SHPPBPL has to create six months of DSRA of which three months was created upfront and remaining three months was to be created from the operating project cash flow. In addition to this, company also has cash and equivalents of Rs 4.5 crore (including DSRA of Rs 3 crore) as on July 18, 2023. Revival in plant operations resulting in monthly cash inflow is crucial.
Further, the company is also expected to receive incentive of Rs 5 crore from the Himachal Pradesh government. However, timing of receipt of cashflows and creation of complete DSRA as per lending terms remain key monitorables.
Susceptibility of water flow to hydrology risk and upstream projects Water level in the Parbati river peaks during the summer and monsoon months (April-September). The more the even inflow into the river, the longer the peak power generation period, and vice versa. Hence, power generation will depend on the availability of adequate water flow. NHPC Ltd is developing Parbati-II, an 800-MW hydropower project about 5 kilometres upstream of SHPPBPL. Once this project is operational, the water flow available to the company may reduce, diminishing its PLF. While CRISIL Ratings has factored in this reduction in its base assessment, any material deviation will remain a key rating sensitivity factor. |
Liquidity: Adequate Liquidity is adequate, with about three months of DSRA funded (Rs 3 crore as on July 11, 2023) and additional cash of Rs 1.5 crore which provides cover for four months with monthly debt obligation of ~Rs 1 crore. The company has a comprehensive insurance policy of Rs 105 crore along with loss of profit claim (Rs 28 crore) against present debt outstanding of Rs 63 crore. Furthermore, the company is expected to receive incentive of Rs 5 crore from the Himachal Pradesh government, which will aid liquidity in the near term; however, timing of the receipt remains a key monitorable.
Capital expenditure of around Rs 7.5 crore (towards connectivity to the upcoming 132-kV line) will be funded through incremental debt (sanctioned by Power Finance Corporation Ltd; however, no disbursement has been made yet), as against earlier expectation that the same will be funded by promoters. Any significant cost overrun, funded through debt will be a key monitorable. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company SHPPBPL was incorporated as a special purpose vehicle to implement a run-of-the-river 9-MW (with 10% continuous overload capability) small hydropower project in Kullu. The project is situated on the perennial Parbati river, one of the main tributaries of Beas River. The project was commissioned in January 2018 and commenced sales to GC customers in April that year. It has PPAs of 12-15 years with Airtel and hospitals and hotels based in Delhi under the GC structure. SHPPBPL is a 100% subsidiary of Skyzen Infrabuild Pvt Ltd, which is a subsidiary of Continuum Energy Pte Ltd (Singapore). |
Key Financial Indicators
* includes promoter loans |
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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