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Home News Power Sector News ICRA assigns highest rating to NTPC Ltd.

ICRA assigns highest rating to NTPC Ltd.

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NTPCCredit rating agency, ICRA assigned 'LAAA' rating, indicating highest credit quality, to Rs 20 billion bonds issue of the India`s biggest thermal power generator NTPC Ltd. The rating reflects NTPC`s dominant position in the Indian power sector, its strategic importance to Government of India for achieving the targeted capacity addition programme under the central sector, a diversified customer base, its cost competitiveness arising out of superior operational efficiencies and proximity of most 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. NTPC`s cash collections as measured by cash collections/current billings continue to remain close to 100% since 2003-04 (as a result of tripartite agreement for settlement of SEB dues and the resultant payment discipline). However, sustainability of such collection efficiencies, going forward, remains an issue if sectoral reforms do not result in a fundamental improvement in the financial position of the state power utilities.

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 0.52 times, however debt servicing ability would remain strong, given the cost plus tariff structure and tariff competitiveness of its existing power plants. The rating also factors in NTPC`s sovereign ownership and the support it has received from Government of India from time to time, the most recent being the issuance of bonds against past overdues.



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