Fitch assigns NTPC BBB- rating & BBB to its rupee bonds

Fitch Ratings has assigned India's largest power generator NTPC’s long-term local-currency IDR 'BBB-' with a 'Stable Outlook' rating. For NTPC's proposed senior unsecured rupee-denominated notes, payable in US dollar, the rating agency has assigned a rating of 'BBB-(emr)(EXP)'.

The notes, which are labelled green, will be issued out of NTPC’s $4-billion medium-term note programme. 

“Investors should note that while the notes are denominated in rupees, both coupon payments and principal on maturity are settled in US dollars at the prevailing rupee-dollar exchange rate; as such, settlements are subject to transfer and convertibility risk on exchange operations involving the Indian rupee (and thus the rating on the notes can be no higher than India's country ceiling, currently 'BBB-'),” said Fitch Ratings in a public statement.

The agency said the notes are rated at the same level as NTPC’s senior unsecured debt rating as they will constitute direct, unconditional, unsubordinated and unsecured obligations of NTPC. 

The proceeds of the proposed green notes, which are to be used for projects with environmental benefits, will be used for NTPC’s renewable power generation projects.

Fitch said the ratings benefit for NTPC arises from its stable operational cash flows due to favourable regulatory framework. The company has long-term power purchase agreements (PPAs) for all its plants, which allows for pass-through of fixed costs as well as fuel costs. Its revenue and profit are regulated, based on invested capital and a rate of return, and incentives under a transparent regulatory cost-plus model. There is regulatory certainty until March 2019, the end of the current five-year regulatory tariff period, it said while elaborating on the robust business of the company.