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ICRA assigns LAAA rating to Rs 10 billion bond issue of NTPC

Written by: Staff

New Delhi, Feb 23 (UNI) Credit rating agency ICRA has assigned an LAAA rating, indicating highest credit quality, to the Rs 10 billion bond issue of National Thermal Power Corporation Ltd (NTPC).

ICRA has also reaffirmed the LAAA rating assigned to the Rs 20 billion outstanding bond issue of NTPC, and assigned an IrAAA rating to the issuer ratings of NTPC indicating that the rated entity carries the lowest credit risk.

The ratings reflect NTPC's dominant position in the Indian power sector, a very diversified customer base and its cost competitiveness, arising out of superior operational efficiencies and proximity of its coal-based plants to pit heads.

The ratings are also supported by NTPC's strong financial position as reflected in low gearing and healthy coverage indicators.

With the tripartite agreement for settlement of SEB dues and the resultant payment discipline, NTPC's cash collections have shown a significant improvement since last year, which will further strengthen its financial position.

The rating takes note of the new tariff norms for the tariff period April 2004 to March 2009, which are likely to result in lower cash accruals. However, debt servicing capacity is unlikely to be affected on account of the facility of Advance Against Depreciation available for repayment of loans.

NTPC has substantial expansion plans which are likely to be funded with a debt:equity ratio of 70:30 which would result in a higher gearing compared to the present debt equity ratio of 0.41 times, however debt servicing ability would remain strong, given its dominant position in the power sector and tariff competitiveness.

The rating also factors in NTPC's sovereign ownership and the support it has received from the Government of India from time to time, the most recent being the securitisation of overdues.

While reaffirming its rating, ICRA has also taken note of the Initial Public Offer of NTPC's equity shares which resulted in an inflow of around Rs 27 billion in FY 2005 and further strengthened its capital structure.

NTPC has an installed capacity of 23,935 MW as on September 30, 2005, accounting for nearly 20 per cent of the country's installed capacity. In 2004-05, it generated 159 billion units, accounting for 27 per cent of the total power generated in the country.

During 2004-05, NTPC reported a profit after tax of Rs 5800 crore on an OI of Rs 22,700 crore.


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