| Transmission Corporation of Andhra Pradesh Limited | ||||||||||
| Bond - Series I/2008 (Option A & B) rating upgrated to 'CRISIL BB+(SO)/Stable' | ||||||||||
| Rating Action | ||||||||||
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| 1 crore = 10 million | ||||||||||
| Refer to annexure for Details of Instruments & Bank Facilities *Amount outstanding as on March 31, 2014 |
| Detailed Rationale |
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CRISIL has upgraded the rating on Rs 350 crore Bond - Series I/2008 (Option A & B) ('Series I/2008') of Transmission Corporation of Andhra Pradesh Limited (APTRANSCO) to 'CRISIL BB+(SO)/Stable' from 'CRISIL D'. While bifurcation of liabilities of APTRANSCO following the bifurcation of the state of Andhra Pradesh (AP) is yet to be formally concluded, the bond series (ISIN: INE947F09073 and INE947F09065) has been acknowledged by APTRANSCO as its own liability. Correspondingly, it has been making repayment on these bonds on time. This has been factored in by CRISIL while upgrading the rating on these bonds. The ratings factor in the strong positioning of APTRANSCO and its high revenue visibility because of regulated tariff. These strengths are constrained by high financial leverage of APTRANSCO, non-completion of liability bifurcation, lack of invocation of government guarantee by the trustee, and non-adherence to the Guarantee T-structure. |
| Key Rating Drivers & Detailed Description |
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Strengths * Monopoly in intra-state power transmission business in AP APTRANSCO enjoys a natural monopoly and transmits power from both public and private generators to power distribution utilities in AP. This is likely to continue over the long term, as the economies of power transmission do not favour multiple networks in the same area. Also, as the designated state transmission utility (STU), it plans and coordinates the wheeling of power and plays a crucial role in the state's economy, as the entire power available in the state flows through its network. CRISIL believes the AP government will extend extensive support to APTRANSCO when required, given the crucial role played by APTRANSCO in supplying and managing operations of electricity in the state. * Full-recovery of cost under regulated tariff structure: APTRANSCO operates under a well-developed regulatory framework. Tariff is determined by Andhra Pradesh Electricity Regulatory Commission (APERC), and enables APTRANSCO to recover expenses and allows for return on capital employed (RoCE, which includes interest cost) based on network availability, provided it meets APERC's stipulated operating norms. Also, APTRANSCO receives stable cash flow as revenue is based on contracted demand by the customers and not the actual flow of power. Weakness * Continued lack of finality over division of liabilities: While the assets and liabilities have been provisionally split between APTRANSCO and TSTRANSCO and are met by the respective transmission company, the bifurcation is yet to be finalised by the central government. Disputes persist over bifurcation of assets and liabilities between the Andhra Pradesh and Telangana governments over different state-owned entities. This could potentially impact debt servicing for the rated bonds. * Failure of designated payment structure: The rating also factors in the failure of the payment structure in the past and the inability of the trustee to ensure adherence to the trustee-administered structure (non-invocation of guarantee). The timeline for funding the escrow account before the due date is also not being adhered to by APTRANSCO, although obligations on Series I/2008 are being met on time. * Modest financial risk profile: APTRANSCO's financial risk profile remains modest on account of its large capital expenditure requirement. Over past 2 fiscals, the company has executed capex of more than Rs 3.500 crore largely towards system improvement and to develop evacuation lines and substations. These investments are largely funded through debt, resulting in moderate rise in gearing to 1.41 times as on March 31, 2018. The gearing may increase beyond 1.5 times largely on account of debt-funded capex of around Rs 4,000 crore. Outlook: Stable CRISIL believes the ratings on Series I/2008 will continue to benefit from stable cash slows and adequate liquidity of APTRANSCO. Upside scenario *Final conclusion of bifurcation of liabilities between APTRANSCO and TSTRANSCO, with no adverse impact *Track record of adherence to the T-structure pertaining to the bonds Downside scenario * Liquidity constraints due to delay in realisations from AP distribution companies (discoms) or government * Weakening of financial risk profile due to larger-than-expected, debt-funded capex Liquidity: Adequate APTRANSCO has adequate liquidity driven by its expected cash accrual of around Rs 450 crore per annum and cash liquidity of Rs 215 crore as on March 31, 2018, vis-a -vis long-term debt obligation of Rs 493 crore in fiscal 2019. CRISIL expects the company's internal accrual, state government budgetary allocation towards the aforementioned bond series, and cash and cash equivalent to be sufficient to meet debt obligation. However, timely servicing of Series I/II 2006 (Option B) will remain contingent on timely fund receipts from TSTRANSCO. |
| About the Company |
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APTRANSCO was incorporated in 1999 as part of the first phase of the power sector reforms in AP. Till 2005, it was the single buyer in the erstwhile AP state and purchased power from public and private power generators and sold to AP discoms in accordance with the power purchase agreement. Subsequently, in accordance with the third transfer scheme notified by GoAP, APTRANSCO ceased to do power trading and has retained powers of controlling system operations of power transmission. APTRANSCO is designated as a state utility in AP after the bifurcation of the state. |
| Key Financial Indicators (APTRANSCO - CRISIL Adjusted numbers) | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
| 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 various bank facilities | ||||||||||||||||||||||||||||||
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