How To Rate Power Finance Corporation (Pfc)

Transcription

1 Power Finance Corporation Limited Rating History Instrument Rs crore ( enhanced from 27,500 cror Long Term Borrowing Programme 20- #$ Rs crore (enhanced from Rs. 3,000 cror Short Term Borrowing Programme#$ Rs crore Infrastructure Bond Programme Rs crore Bank Line of Credit Bank Line of Credit (Term loans) Rs crore Short Term Debt/Commercial Paper Amount Outstan ding (in Rs. cror Maturity date Rating Outstandi ng Previous Ratings Mar- Oct- Sep- Mar- Yet to be AA placed Yet to be placed Series May 15- May AA AA 708 AA AA Series-66-A 500 Jun-20 AA Series-66-B 1532 Jun-25 AA Seres-66-C 633 Jun-30 AA Series Jul- AA Series 68-A 147 Jul-15 AA bl bl bl A1+ bl bl bl bl bl bl

2 Series 68-B 1424 Jul-20 AA Series Sep- AA Series Nov-20 AA Series Dec 20 Dec 30 AA Series 72-A 144 AA Series 72-B 19 AA Series Mar 15- Mar 25 Series Mar 15- Mar 25 AA AA Series 62 A 845 Jan-20 AA Series 62 B 73 Jan-25 AA Series Dec 14- Dec 24 AA Series 60 A 5 Nov- AA Series 60 B 925 Nov-19 AA Series 59 A 288 Oct-14 AA Series 59 B Oct-19 AA Series 58 A 100 Sep- AA Series 58 B 331 Sep-14 AA Series 57 B 2600 Aug 14 Aug 24 AA bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl

3 Series Jul- AA Series 55 A 877 May- AA Series 55 B 147 May-14 AA 54-A Feb- 14 XLVI May- XLVIIA Jun- XLVIIB Jun- XLVIIC Jun- XLVIIIA Jul- XLVIIIB 2 15-Jul- XLVIIIC Jul- XLIXA 314 -Aug- XLIXB 429 -Aug- L-A Aug- L-B Aug- L-C Aug- 15 LI-A Sep- LI-B Sep- AA AA AA AA AA AA AA AA AA AA AA AA AA AA AA bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl

4 LI-C Sep- LII-A Nov- LII-B 6 28-Nov- 15 LII-C Nov- LIII Jul- 10 XXXV 530 -May- AA AA AA AA AA AA XXXVI-A AA XXXVI-B Jun- XXXVIII Sep- XL-B Series Dec- XL-C Series Dec- XLI-B Jan- AA AA AA AA AA XLII-A AA XLII-B Feb- XLIII-A -Mar- XLIII-B 272 -Mar- XLIV Mar- AA AA AA AA XXIV AA bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl LAAA (stabl bl

5 XXV Dec- 15 XXVI Feb- 16 XXVII-A Mar- 16 XXVII-B 850 -Mar- XXVIII May- 21 XXIX-A Sep- 16 XXIX-B Sep- XXX Oct- XXXI-A Dec- 16 AA AA AA AA AA AA AA AA AA XXXI-B AA XXXII Feb- XXXIII-A 2 22-Mar- XXXIII-B Mar- XXXIV Mar- XXI-IA 86 Nov 09- XXI-IB 169 Nov - 14 XXII 694 Dec 09- PFC Infrastructure Bond ( ) AA AA AA AA AA AA AA AA bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl bl

6 XX Aug XXIII 203 Jul 10- III 19-Jul- 10 X 53.1 Nov-08- XI 744 Feb 09- AA AA AA AA AA XIII 190 -May AA XIV AA XV AA XVI AA XVII 5 Oct 08 - XVIII 5 Nov 08- XIX Dec- 22 AA AA AA LIC LOAN 500 AA Fixed Deposits MAAA MAAA(S bl bl bl bl bl bl bl bl bl bl bl bl bl MAAA tabl #Utilisation of total bonds and bank borrowing programme is subject to a limit of Rs. 43,500 crore $ Total utilisation during 20- not to exceed Rs. 43,500 crore, subject to maximum short-term borrowings of Rs. 5,000 crore ICRA has assigned the rating of AA (pronounced ICRA triple A) to the enhanced long term borrowing programme aggregating to Rs. 43,500 crore (enhanced from Rs. 27,500 cror of Power Finance Corporation Limited (PFC). ICRA has also assigned the rating of [ICRA] A1+ (pronounced ICRA A one plus) to the short term borrowing programme of the corporation, for an enhanced amount of Rs. 5,000 crore (from Rs. 3,000 cror. ICRA has also withdrawn the outlook on the outstanding long term and fixed deposit ratings of the corporation. ICRA is unable to ascertain the For complete rating scale and definitions, please refer ICRA s website or other ICRA Rating Publications.

7 outlook, in absence of clarity on critical measures to improve the financial health of the State power utilities as well as to alleviate fuel linkage issues for Independent Power Producers. ICRA has serious concerns over the likely increase in the counterparty credit risk for a large number of PFC s borrowers, given their exposure to several State power distribution entities that have been reporting significant losses for quite some time. PFC s direct exposure to State distribution entities with weak credit profiles however remains low. But that would cease to provide comfort beyond a point, given that several State power generation companies, who are large borrowers of PFC and account for a chunk of its loan book, could find their cash flows impacted by the deteriorating fiscal health of the distribution entities. PFC s collection efficiency from State utilities has however been high at over 99% so far. On the policy front, ICRA takes note of the initiatives of the Ministry of Power Ministry to improve the financial health of the State utilities, with such initiatives including, among others, setting up of a committee to assess the total losses of State power utilities and launch of a revised APDRP * (R- APDRP) scheme to assess and curtail AT&C losses. Further, the resolutions adopted by State Power Ministers at their July 20 conference on Distribution Sector Reforms are steps in the right direction, as are the recent tariff revisions/proposals by certain States. However, timely implementation of the corrective steps proposed, including significant tariff revision, is required to address the growing concerns over the financial health of the State power utilities. Similarly, issues relating to fuel linkages and tariff policy for private sector projects need to be addressed urgently. On its part, ICRA will continue to closely monitor developments on the policy front as this will have a critical bearing on PFC s credit profile. ICRA has taken note of the potential exchange translation losses PFC is likely to incur during Q2 20, on account of its large quantum of un-hedged foreign currency borrowings (which is in excess of 20% of its net worth), and the adverse exchange rate movement in the current financial. Such exchange translation losses are likely to have a material impact on its earnings in Q2 20. However such foreign currency borrowings have been raised at relatively longer tenures, typically of over 5 years, and till Mar-14 only a small quantum of foreign currency liabilities is falling due for maturity; therefore potential crystallization of losses till Mar-14 may not be significant. Nevertheless going forward PFC s credit profile would be sensitive to its ability to manage its exposure to foreign exchange risks. The highest-credit-quality ratings continue to reflect PFC's majority sovereign ownership and its strategically important role in the implementation of various Government of India (GoI) schemes such as Ultra Mega Power Projects (UMPPs) and R-APDRP for the development of the country s power sector. This apart, ICRA takes into account the follow-on public offering (FPO) of PFC in May 20, following which the GoI s shareholding in the corporation has declined from 89.78% to 73.2% while its net worth has increased by around Rs. 3,400 crore. In ICRA s view, the reduction in the GoI s shareholding is unlikely to impact PFC s role and its strategic importance. Also, the expansion of PFC s equity base would bring down its leveraging from 5.55 times as in March 20 to 4.55 times post the FPO. Going forward, it would be important for PFC to maintain a prudent capital structure, given the concentration of weaker State-level entities in its portfolio. Further, it would be vital for PFC to maintain satisfactory collections from its exposures to independent power producers (IPPs), which have been borrowing more and which are also exposed to counterparty and fuel linkage risks. The ratings continue to draw comfort from PFC s adequate earning profile supported by its ability to borrow funds at competitive rates and low credit and intermediation costs. The corporation s net interest margins improved from 4.% in to 4.39% in 2010-, and have been in the range of % over the last few years, enabling it to report strong returns on net worth (over % over the last four years). Further, PFC enjoys a comfortable asset-liability matching profile (with low * Accelerated Power Development and Reform Programme Aggregate Technical and Commercial Losses (Total Debt as on March 31, 20)/(Net Worth as on March 31, 20 + Rs. 3,400 crore of approximated FPO proceeds)

8 cumulative mismatches in the short term), besides scoring high on financial flexibility. As for recovery performance, the corporation has so far been able to maintain over 99% levels of recovery with both State utilities and IPPs, as is corroborated by its relatively low gross non-performing asset (gross NPA) percentage of 0.23% as on June 30, 20. PFC reported a total credit portfolio of Rs. 1,04,082 crore as on June 30, 20, achieving a yearon-year portfolio growth of 21.6%. Its portfolio mix as on June 30, 20 showed around 65% of its total credit book taken up by State entities, 20% by Central sector projects, 8% by joint sector projects, and 7% by IPPs. About the Corporation A specialised development financial institution, PFC was set up in 1986 to fund projects in the domestic power sector. Held 73.72% by the GoI as on June 30, 20, PFC provides loans for a range of power-sector activities, including generation, distribution, transmission, and plant renovation and maintenance. PFC finances State sector entities such as State Electricity Boards and State Generating Companies, as well as IPPs. In addition, the corporation has been appointed the nodal agency to develop 16 UMPPs in the country. According to the audited results for the financial year ended March 31, 20, PFC reported a net profit of Rs. 2,619 crore on an asset base of Rs. 1,04,634 crore that year, as against corresponding figures of Rs. 2,357 crore and Rs. 84,777 crore the previous financial year. For the quarter ended June 30, 20, PFC reported a profit after tax (PAT) of Rs. 686 crore, as against the Rs. 652 crore PAT reported during the corresponding previous. As on June 30, 20, PFC s gross NPA percentage stood at 0.23%. October 20 For further details please contact: Analyst Contacts: Ms. Vibha Batra (Tel No ) [email protected] Analyst Contacts: Mr. Anjan Ghosh (Tel No ) [email protected] Relationship Contacts: Mr. Vivek Mathur, (Tel No ) [email protected] Copyright, 20, ICRA Limited. All Rights Reserved. Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. The ICRA ratings are subject to a process of surveillance which may lead to a revision in ratings. Please visit our website ( or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents

9 Registered Office ICRA Limited 05, Kailash Building, th Floor, 26, Kasturba Gandhi Marg, New Delhi 0001 Tel: , Fax: Corporate Office Mr. Vivek Mathur Mobile: Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon 2002 Ph: (D), / (B) Fax; Mumbai Mr. L. Shivakumar Mobile: / [email protected] 3rd Floor, Electric Mansion, Appasaheb Marathe Marg, Prabhadevi, Mumbai Ph : / 1053/ 1062/ 1074/ 1086/ 1087 Fax : Chennai Mr. Jayanta Chatterjee Mobile: [email protected] 5th Floor, Karumuttu Centre, 498 Anna Salai, Nandanam, Chennai Tel: / 94, / 9659/ 8080, , Fax: Ahmedabad Mr. L. Shivakumar Mobile: [email protected] 907 & 908 Sakar -II, Ellisbridge, Ahmedabad Tel: , , , TeleFax: Hyderabad Mr. M.S.K. Aditya Mobile: [email protected] Kolkata Ms. Anuradha Ray Mobile: / [email protected] A-10 &, 3rd Floor, FMC Fortuna, 234/ 3A, A.J.C. Bose Road, Kolkata Tel: / 8839/ Fax: Bangalore Mr. Jayanta Chatterjee Mobile: [email protected] 2 nd Floor.,Vayudhoot Chambers, Trinity Circle, M.G.Road, Bangalore Tel: / 4049 Fax: Pune Mr. L. Shivakumar Mobile: [email protected] 5A, 5th Floor, Symphony, S.No. 210, CTS 3202, Range Hills Road, Shivajinagar,Pune Tel : (91 20) ; Fax : (91 20) , CONCOURSE, 3rd Floor, No , Ameerpet, Hyderabad Tel: /7251 Fax: