Haryana's power transco is weak; study says

New Delhi, Sep 9 (UNI) Haryana's power transmission monopoly , Haryana Vidyut Prasaran Nigam Ltd (HVPNL), has a weak financial risk profile, and is heavily dependent on short-term loans to meet large working capital requirements, a study says.

Credit profiles of HVPNL's two distribution companies are also weak, and are unlikely to improve significantly over the medium term, Crisil says in its first non-investment grade ratings.

HVPNL, which receives almost 70 per cent of its revenues from its two distribution companies (discoms), suffered a net loss of Rs 10 crore on a revenue of Rs 590 crore in 2006-07, as against a loss of Rs 11 crore on revenue of Rs 480 crore in 2005-06, the rating agency says.

The state's lone licensee for transmission of power to the two discoms and various open access consumers had a gearing of 5.55 times as on March 31, 2006.

Gearing is a measure of financial leverage, demonstrating the degreee to which a company's activities are funded by owner's funds versus creditor's funds.

The higher a company's degree of leverage, the riskier it is considered.

Crisil says HVPNL's gearing, though likely to improve, is expected to remain high over the medium term, as the company's proposed capital expenditure will be funded at the 70:30 debt-to-equity ratio that has been set by the regulator.

HVPNL has weak debt protection measures. In 2005-06, it had an interest coverage ratio of 0.88 times, and negative net cash accruals.

Crisil, which has assigned a corporate credit rating of 'CCR BB+' to HVPNL, says it reflects HVPNL's risks of concentration of revenues with off-takers who have below-average credit profiles, and the company's own below-average financial risk profile.

These weaknesses are, however, partially offset by HVPNL's monopoly in intra-state power transmission, stable revenues, and efficient operations.

But highly regulated nature of the power industry, and the tariff structure, assure HVPNL of stable revenues. Based on the performance benchmark mandated by the regulator, the company's tariffs allow for recovery of fixed costs, and a return on equity of 14 per cent.

HVPNL has efficient operations, marked by a high network availability of 99.5 per cent, low transmission losses of 4.4 per cent, and a high collection efficiency of almost 100 per cent, the rating agency adds.

UNI