New Delhi, Jan 10: The leading rating agency, Fitch Ratings has assigned Power Grid Corporation of
India Ltd (POWERGRID) a Long-Term Local-Currency Issuer Default Rating (IDR) of
'BBB-', which is at the same level as its Long-Term Foreign-Currency IDR of
'BBB-'. It has said that the outlook is Stable.
According to a release, Fitch assesses POWERGRID's standalone
profile at 'BBB'. The company's IDRs are constrained by the 'BBB-' IDR of
India, which owns 57.9 per cent (at end-September 2017) of the company.
POWERGRID's rating benefits from the regulatory nature of more than 95 per cent of its revenue, which has no offtake risk as long as it meets regulatory operational benchmarks; 98 per cent availability for alternating current systems and 95 per cent for high-voltage direct-current systems.
The company has maintained availability for both systems at well over 99 per cent (financial year ended March 2017 (FY17): 99.79 per cent). Revenue from existing operational transmission assets is based on a return on equity of 15.5 per cent and full pass-through of all fixed costs within regulatory norms, including interest charges. The latest five-year regulatory tariff period extends to FY19.
It said that India's new transmission projects have only been awarded through tariff-based competitive bidding since 2011, except for certain projects of strategic importance, technical upgrades or urgent requirements, which are awarded directly to POWERGRID.
POWERGRID has had 11 projects awarded through the bidding scheme and aims to complete 10 of them (one project has been discontinued) by 2020. Returns from tariff-based bidding projects are less protected than from existing operational assets under a cost-plus tariff model.
However, Fitch does not expect these projects to account for more than 5 per cent of POWERGRID's revenue in the medium term; it had Rs 1.1 trillion of transmission projects in its pipeline at end-September 2017, with only INR180 billion of projects under the tariff-based bidding scheme.
POWERGRID's ratings benefit from its strong market position. The company owns and operates around 85 per cent of India's inter-regional and inter-state electricity transmission network assets. POWERGRID commissioned Rs 320 billion of projects in FY17, exceeding Fitch's expectations, and plans total capex of about Rs 250 billion per year over the next three years. UNI
POWERGRID's rating benefits from the regulatory nature of more than 95 per cent of its revenue, which has no offtake risk as long as it meets regulatory operational benchmarks; 98 per cent availability for alternating current systems and 95 per cent for high-voltage direct-current systems.
The company has maintained availability for both systems at well over 99 per cent (financial year ended March 2017 (FY17): 99.79 per cent). Revenue from existing operational transmission assets is based on a return on equity of 15.5 per cent and full pass-through of all fixed costs within regulatory norms, including interest charges. The latest five-year regulatory tariff period extends to FY19.
It said that India's new transmission projects have only been awarded through tariff-based competitive bidding since 2011, except for certain projects of strategic importance, technical upgrades or urgent requirements, which are awarded directly to POWERGRID.
POWERGRID has had 11 projects awarded through the bidding scheme and aims to complete 10 of them (one project has been discontinued) by 2020. Returns from tariff-based bidding projects are less protected than from existing operational assets under a cost-plus tariff model.
However, Fitch does not expect these projects to account for more than 5 per cent of POWERGRID's revenue in the medium term; it had Rs 1.1 trillion of transmission projects in its pipeline at end-September 2017, with only INR180 billion of projects under the tariff-based bidding scheme.
POWERGRID's ratings benefit from its strong market position. The company owns and operates around 85 per cent of India's inter-regional and inter-state electricity transmission network assets. POWERGRID commissioned Rs 320 billion of projects in FY17, exceeding Fitch's expectations, and plans total capex of about Rs 250 billion per year over the next three years. UNI
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