India Ratings and Research\r\n(Ind-Ra) has taken the following rating action on Alipurduar Transmission\r\nLimited’s (ApTL) debt:
Analytical Approach: Ind-Ra continues to analyse ApTL on a standalone\r\nbasis, while drawing comfort from the support available from Adani Transmission\r\nLimited (ATL, ‘IND\r\nAA+’/Stable) if the asset is damaged\r\nby an event considered to be force majeure.
The rating reflects ApTL’s\r\nstable operating track record with the actual availability above the normative\r\nparameters, adequate liquidity, strong debt structure, comfortable coverage\r\nratio, support undertaking from the sponsor, ATL, which operates multiple\r\ntransmission assets with a reasonably stable track record of availability, and the\r\npoint of connection mechanism-based payments from the counterparty.
\r\n\r\n\r\n\r\n\r\n\r\n
Stable Track Record of Operations: The monthly average availability was consistently above\r\n99% during FY20-FY22 and the asset has reported 100% availability in 10MFY23. The\r\ntariff for ApTL is defined for 35 years from the commercial operations date (COD)\r\nunder the transmission service agreement (TSA). The tariff structure has no variable\r\ncomponent. The entire tariff will accrue to ApTL if the annual availability exceeds\r\n98% and an incentive is payable if the annual availability is above 98%. Tariff\r\npayment to ApTL will not depend on the quantum of energy flow in its assets. Transmission\r\nassets are monopolistic since new assets are added only when existing assets\r\nare not adequate to serve the emerging requirements. Revenue from transmission\r\nassets are characterised by a higher certainty and a lower dependence on\r\nregulatory intervention than other power sector assets.
Strong Debt Structure of NCDs: The\r\nNCDs feature amortising repayments for 82% of the amount, adequate cash sweep\r\nfor meeting the bullet repayment in March 2041, fixed interest rate for various\r\ntenors compared to entirely floating rate applicable for existing term loan,\r\none quarter upfront debt service reserve and restricted payment, and cashflow\r\nwaterfall mechanism. In Ind-Ra’s base case projection, the average debt service\r\n(DSCR) is around 1.2x excluding the bullet\r\nrepayment. The project life coverage ratio is comfortable above 1.2x throughout\r\nthe loan tenor, providing adequate visibility for refinancing. Compulsory\r\nquarterly cash sweep starts from 4QFY32 from the surplus cash, and the\r\ncumulative cash sweep by the end of 3QFY41 would be equivalent to the entire\r\nbullet repayment. Restricted payment will be allowed biannually, subject to\r\nmeeting the DSCR covenant of 1.17x, no occurrence of payment default or other\r\nevent of default or force majeure, among others.
The NCDs will be in the\r\nform of six series each amounting to INR1,007.5 million (S1), INR1,460 million\r\n(S2), INR1,420 million (S3), INR2,220 million (S4), INR1,365 million (S5) and\r\nINR1,695 million (S6), having a tenor of around three years, six years and nine\r\nyears, respectively, for the first three series and 15 years for the fourth\r\nseries and 18 years for the remaining two series. The redemptions are structured quarterly\r\npayments for S1 – S5 commencing on 31 March 2023 and with a bullet redemption for\r\nS6 on 31 March 2041. S1 redemption starts on 31 March 2023 and ends on 30\r\nSeptember 2025, and subsequent series redemption starts in the next quarter to\r\nthe previous series redemption, and henceforth with S5 redemption ending on 31\r\nDecember 2040.
Coupon reset for S2, S3,\r\nS4 and S6 have coupon resets in three years, three/six years, nine years and\r\nnine years from the deemed date of allotment of the NCDs. As per the defined coupon\r\nreset process, a revised coupon rate should be mutually agreed between the issuer\r\nand majority NCD holders of a particular series (i.e. 75% outstanding NCD) at\r\nleast 90 days prior to the reset date. If there is no consensus, the issuer and\r\nholder can exercise the call/put option, respectively, subject to written\r\nintimation at least 60 days before the reset date. The timelines defined for\r\nthe coupon reset process and 60-day notice period, along with a comfortable project\r\nlife coverage ratio throughout the loan tenor provide comfort regarding the put\r\noption risk. While the put-option linked to coupon reset risk is not immediate\r\nin nature with the first reset date falling in January 2026, any development\r\nleading to increase in refinancing risk will be a key monitorable.
Liquidity Indicator – Adequate: ApTL\r\nhas cash flow stability, backed by the cash flow pooling mechanism that has led\r\nto regular payments to transmission companies since 2012. Furthermore, the collection\r\nratio remained comfortable at 96% in 9MFY23 (FY22: 103%; FY21: 94%), along with\r\nadequate coverage indicators. As on 31 January 2023, the project had debt\r\nservice reserve account of INR304.5 million, equivalent to three months of debt\r\nservicing and surplus liquidity of INR206.3 million.
Strong Sponsor Profile:\r\nATL holds an operational portfolio of 24 projects and under implementation\r\nportfolio of seven projects with a cumulative transmission network of over18,796\r\ncircuit km (ckm), of which more than 14,961ckm is operational (80%), including\r\naround 3,835ckm in various stages of construction. Additionally, the company\r\nhandles a total transformation capacity of 40,510 mega volt ampere, of which 49%\r\nis operational. In 1HFY23, the consolidated net leverage (net debt/EBITDA)\r\nincreased to 7.53x (FY22: 5.18x; FY21: 5.07x) and the interest coverage\r\n(EBITDA/ interest expenses) decreased to 1.43x (2.03x; 2.12x).
ATL acquired a 49% stake in\r\nApTL on 26 November 2020 from KPTL and acquired another 25% stake on 13 October\r\n2022. The acquisition of the balance stake has been impeded by the equity\r\nlock-in period defined in the TSA; the remaining stake will be transferred to\r\nATL on expiry of the equity lock-in period. ATL has appointed the board members\r\nof ApTL and acquired the beneficial ownership of ApTL, based on the share\r\npurchase agreement.
The share purchase and\r\nshareholding agreement has defined litigations that have already been filed or\r\nare yet to be filed with the Central Electricity Regulatory Commission\r\n(CERC)/relevant authority and they relate to change in law, extension in COD\r\nand the recognition of additional capital expenditure. KPTL has recognised\r\nunder SPSHA that only payments due to it will be based on the outcome of these\r\nlitigations; the method of pay-outs by ATL or ApTL to KPTL for various outcomes\r\nof litigations have also been defined. Since any payment to KPTL needs to be\r\nmade after the receipt of a favourable order from the CERC, the impact on the\r\nacquisition value due to such pay-outs will be neutral for ATL and ApTL.
Low Counterparty Risk: Revenue\r\nfor an inter-state transmission system (ISTS) is received from all customers of\r\nISTS assets and depends on the consumer’s quantum of open access, i.e. the\r\nextent to which ISTS is used by the consumer, the direction of energy flow, among\r\nothers. Consumers of an ISTS are distribution utilities, generation companies\r\nand industrial consumers. The revenue collection mechanism ensures that revenue\r\nis collected with respect to all ISTS assets.
The revenue sharing\r\nmechanism is applied with respect to any revenue receipt from consumers. Each\r\nrevenue receipt is shared among transmission projects in the proportion of\r\ntheir respective annual revenue required to the overall revenue required for\r\nall transmission projects. Thus, for transmission projects, the revenue receipt\r\nis independent of the amount of energy passing through each transmission asset.\r\nThe monopolistic nature of transmission assets ensures that distribution\r\nutilities and other customers prioritise payments towards transmission assets\r\nto maintain access. Regulations provide for the denial of open access to a\r\ndefaulting entity to recover the transmission tariff.
Force Majeure Related Risk:\r\nApTL is based in the eastern region of India, where flooding/changes in the river\r\ncourse have caused damages to transmission assets. ISTS assets will receive the\r\nentire revenue (excluding incentive) when any damage is caused by an event that\r\nis classified as force majeure. ATL has undertaken to infuse funds to meet any\r\namount required for the repair of ApTL’s damaged assets pending the receipt of\r\ninsurance proceeds or any shortfall in the insurance proceeds and\r\nself-insurance reserve. Historically, significant damages to the assets linked\r\nto weather/environment forces have been approved as force majeure. Ind-Ra takes\r\ncomfort in the predictable nature of such approvals and the approach taken by\r\nEastern Region Power Committee in considering such instances and allowing\r\nsufficient time for restoration. Ind-Ra takes comfort from ATL’s undertaking to\r\nmeet restoration expenses net of insurance proceeds, which would enable the\r\ntimely restoration of the asset and avoid cash flow stress in ApTL.
Periodic maintenance on a\r\nmonthly and quarterly basis, and the presence of an emergency restoration\r\nsystem to temporarily restore towers due to any exigencies are added comfort. Ind-Ra\r\ncontinues to assume higher O&M cost (factoring any contingency for insurance)\r\nthan management estimates, based on the trends observed in transmission\r\nprojects in the eastern region of India. An increase in the third-party\r\ninsurance cost could be significant if the asset is affected by any natural\r\nevents. ApTL has adequate buffer in the DSCR and project life coverage ratio of\r\n1.2x for addressing the impact of any significant increase in the operating\r\nexpenses.
Self-Insurance Reserve:\r\nATL has opted for the concept of a self-insurance reserve for the transmission\r\nlines in the 16 operational assets bid under the tariff-based competitive\r\nbidding route including ApTL. This reserve has been created at ATL’s level and\r\nonly for the transmission lines, while sub-stations, associated cable\r\nconnectivity and other capital equipment have been covered comprehensively\r\nunder third-party insurance policies. As on 31 March 2022, INR264.7 million was\r\navailable as self-insurance reserve for 16 operational assets and is equivalent\r\nto 0.3%\r\nof the replacement value of transmission lines covered. The reserve shall be increased by 0.05% of the replacement value\r\nannually to ultimately create a reserve, equivalent to 0.50% of the replacement\r\nvalue of transmission lines covered. In case the self-insurance reserve is\r\ndipped into, ATL has to replenish the same from the liquidity reserve account\r\nmaintained by it.
If the amount in two\r\nreserves are insufficient, ATL has to infuse the balance amount and restore the\r\nreplenish the reserves. The transmission assets get the benefit of deemed\r\navailability in case affected by force majeure events, thus allowing for a\r\ncontinuous revenue recovery as long as the damaged assets are restored in a\r\nreasonable time. Historically, there has not been major incidents in ATL’s\r\ntransmission lines requiring substantial capex. ApTL has third party insurance\r\nfor its substation. Ind-Ra will monitor any addition of assets in a difficult\r\nor vulnerable terrain which could lead to any significant adhoc expenditure.
Liquidated Damages (LDs) Backed by Bank Guarantee: Ind-Ra has considered that there will not be any impact on\r\nApTL’s cash flows due to the levy of LD, as LDs have to be met by KPTL under\r\nthe share purchase agreement. KPTL\r\nhas provided a performance bank guarantee, with no recourse to ApTL, of INR405\r\nmillion valid till March 2023. ATL\r\nhas represented that it will meet interim funding to meet LD obligations, if required.\r\nSouth Bihar Power Distribution Company Limited, the lead long-term transmission\r\ncustomer under the TSA, has raised a claim of INR169.46 million as LD for delays\r\nin achieving COD. ApTL has filed a petition with CERC for an extension in the timelines\r\nfor achieving the COD, based on delays in approvals, flooding and right of way\r\nissues. ApTL had no contingent liability as on 31 March 2022.
Negative: Future developments\r\nthat could, individually or collectively, lead to a negative rating action\r\nare:
- non-achievement of\r\nthe target availability,
- an increased\r\nliquidity risk, stemming from a spike in the receivable days from the\r\ncounterparties of the underlying assets,
- a DSCR lower than\r\n1.15x,
- a significant downgrade\r\nof ATL’s rating, leading to any adverse consequence on ApTL.
ESG\r\nFactors Minimally Relevant to Rating: Unless\r\notherwise disclosed in this section, the ESG issues are credit neutral or have\r\nonly a minimal credit impact on ApTL, due to either their nature or the way in\r\nwhich they are being managed by the entity. For more information on\r\nInd-Ra’s ESG Relevance Disclosures, please click here. For\r\nanswers to frequently asked questions regarding ESG Relevance Disclosures and\r\ntheir impact on ratings, please click here.
ApTL consists of two\r\nelements; element 1 includes Kishanganj to Darbhanga transmission line of 214km\r\nlength, two 400kV line bays and switchable line reactors in or near Darbhanga substation,\r\nand element 2 includes) Alipurduar to Siliguri transmission line of 115km\r\nlength. Element 1 and 2 of ApTL were commissioned on 20 January 2020 and 14\r\nMarch 2019, respectively.
FINANCIAL SUMMARY
\r\n\r\n\r\n\r\n\r\n\r\n
| \r\n Particulars (INR million) | \r\n \r\n 1HFY23 | \r\n \r\n FY22 | \r\n \r\n FY21 | \r\n
| \r\n Revenue from operations | \r\n \r\n 790 | \r\n \r\n 1,643 | \r\n \r\n 1,858 | \r\n
| \r\n Total revenue | \r\n \r\n 847 | \r\n \r\n 1,718 | \r\n \r\n 1,870 | \r\n
| \r\n EBITDA | \r\n \r\n 799 | \r\n \r\n 1,652 | \r\n \r\n 1,797 | \r\n
| \r\n EBITDA margin (%) | \r\n \r\n 94 | \r\n \r\n 96 | \r\n \r\n 96 | \r\n
| \r\n Finance cost | \r\n \r\n 381 | \r\n \r\n 790 | \r\n \r\n 889 | \r\n
| \r\n Interest coverage (EBITDA/Interest) (x) | \r\n \r\n 2.10 | \r\n \r\n 2.09 | \r\n \r\n 2.02 | \r\n
| \r\n Gross debt/EBITDA (x) | \r\n \r\n NM | \r\n \r\n 5.57 | \r\n \r\n 5.14 | \r\n
| \r\n Cash and cash equivalents | \r\n \r\n 32 | \r\n \r\n 82 | \r\n \r\n 419 | \r\n
| \r\n Source: ApTL, Ind-Ra | \r\n
Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings.
Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.
","participationDisclosures":null,"disclaimer":"ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: https://www.indiaratings.co.in/ratingdefinitions. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.
","metaTags":null,"effectiveDate":"Feb 23, 2023 | Alipurduar Transmission Limited","effectiveDateTime":"0001-01-01T00:00:00","dateOfCreation":"Feb 23, 2023","isDeleted":false,"isMigratedData":false,"viewCount":594,"facebookShareCount":0,"linkedInShareCount":0,"googlePlusShareCount":0,"twitterShareCount":0,"ratingCriteriaReportsIDs":"173,176,178,157,158","pressReleaseStatus":"Publish","activity":"Updated By UserID: 12","lastActivityDate":"5/15/2023 6:51:34 AM","currentRatings":"| \r\n Instrument Type | \r\n \r\n Date of Issuance | \r\n \r\n Coupon Rate (%) | \r\n \r\n Maturity Date | \r\n \r\n Size of Issue (million) | \r\n \r\n Rating/Outlook | \r\n \r\n Rating Action | \r\n
| \r\n Non-convertible debentures\r\n (NCDs)^# | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n \r\n INR9,167.5 | \r\n \r\n IND AAA/Stable | \r\n \r\n Assigned | \r\n
| \r\n Term\r\n loan* | \r\n \r\n - | \r\n \r\n - | \r\n \r\n 31 March 2038 | \r\n \r\n INR9,146.8\r\n | \r\n \r\n WD | \r\n \r\n WD (paid\r\n in full) | \r\n
\r\n\r\n
^The final rating has been assigned upon the execution\r\nof the debenture trustee deed in line with the draft terms considered\r\nwhile assigning the provisional rating. ApTL refinanced its bank loan using the\r\nNCD issuance.
#Details in Annexure
| \r\n Instrument Type | \r\n \r\n Current Rating/Outlook | \r\n \r\n Historical Rating/Outlook | \r\n ||||
| \r\n Rating Type | \r\n \r\n Rated Limits (million) | \r\n \r\n Rating | \r\n \r\n 30 December 2022 | \r\n \r\n 2 March 2022 | \r\n \r\n 4 December 2020 | \r\n |
| \r\n Term\r\n loan | \r\n \r\n Long-term | \r\n \r\n INR9,146.8 | \r\n \r\n WD | \r\n \r\n IND AAA/Stable | \r\n \r\n IND AAA/Stable | \r\n \r\n IND AA+/Stable | \r\n
| \r\n NCDs | \r\n \r\n Long-term | \r\n \r\n INR9,167.5 | \r\n \r\n IND AAA/Stable | \r\n \r\n Provisional IND AAA/Stable | \r\n \r\n - | \r\n \r\n - | \r\n
| \r\n Instrument\r\n type | \r\n \r\n ISIN | \r\n \r\n Date of\r\n Issuance | \r\n \r\n Coupon Rate | \r\n \r\n Maturity\r\n Date | \r\n \r\n Size of\r\n Issue (million) | \r\n \r\n Rating/Outlook | \r\n
| \r\n NCDs | \r\n \r\n INE446V08026 | \r\n \r\n 18 January 2023 | \r\n \r\n 7.95% | \r\n \r\n 30 September 2025 | \r\n \r\n INR1,007.5 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n NCDs | \r\n \r\n INE446V08042 | \r\n \r\n 18 January 2023 | \r\n \r\n 8.27% | \r\n \r\n 31 March 2041 | \r\n \r\n INR1,695 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n NCDs | \r\n \r\n INE446V08059 | \r\n \r\n 18 January 2023 | \r\n \r\n 8.27% | \r\n \r\n 31 December 2040 | \r\n \r\n INR1,365 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n NCDs | \r\n \r\n INE446V08067 | \r\n \r\n 18 January 2023 | \r\n \r\n 8.27% | \r\n \r\n 30 September 2037 | \r\n \r\n INR2,220 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n NCDs | \r\n \r\n INE446V08018 | \r\n \r\n 18 January 2023 | \r\n \r\n 8.15% | \r\n \r\n 30 September 2031 | \r\n \r\n INR1,420 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n NCDs | \r\n \r\n INE446V08034 | \r\n \r\n 18 January 2023 | \r\n \r\n 8.15% | \r\n \r\n 30 September 2028 | \r\n \r\n INR1,460 | \r\n \r\n IND AAA/Stable | \r\n
| \r\n Total | \r\n \r\n \r\n | \r\n \r\n \r\n | \r\n \r\n \r\n | \r\n \r\n \r\n | \r\n \r\n INR9,167.5 | \r\n \r\n \r\n | \r\n
| \r\n Instrument Type | \r\n \r\n Complexity Indicator | \r\n
| \r\n Term loan | \r\n \r\n Low | \r\n
| \r\n NCDs | \r\n \r\n Low | \r\n
\r\n\r\n\r\n\r\n
For details on the complexity level of the\r\ninstrument, please visit https://www.indiaratings.co.in/complexity-indicators.
About India Ratings and Research: India Ratings and Research (Ind-Ra) is committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market.
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\r\nHeadquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank.
\r\nIndia Ratings is a 100% owned subsidiary of the Fitch Group.
\r\nFor more information, visit www.indiaratings.co.in.
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