Ratnagiri Gas and Power loses investment grade rating for term loans

CARE downgrades company from "BBB-" to "BB+"

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Rating agency CARE has downgraded rating for Ratnagiri Gas and Power Pvt Ltd’s (RGPPL) credit to “BB+” from “BBB-“ on continued uncertainty on gas availability leading sub-optimal running of power plant and the losses in Fy13.

Earlier rating was placed on credit watch in view of the uncertainty in the domestic gas availability. The rating has been removed from credit watch.

The power plant has been not able to run at its optimal capacity over the past few months. The company reported loss (Rs 375 crore) in year ended March 2013 due to the reduction in units generated due to the declining fuel availability and the delays in recovery of receivables, CARE said in statement.

It had posted a net profit of Rs 1,089 crore in year ended March 2012. Its total operating income declined to Rs 2,206 crore in FY13 from Rs 5,177 crore in FY12.

Furthermore, the rating continues to be constrained by the risk associated with the stabilization of the Regasified Liquefied Natural Gas (RLNG) operations and delay in the completion of breakwater facilities, it said.

RGPPL owns an integrated gas-based power generation plant having a capacity of approximately 1,967 MW and a Re-gasified LNG terminal (R-LNG) with a capacity of approximately 5 MMTPA (Million Metric Tonnes Per Annum) at Dabhol, Maharashtra.

CARE said the rating derives strength from RGPPL’s strong parentage, long-term power purchase agreement (PPA) with ‚take or pay clause‛ in place, assured minimum re-gasification revenue for R-LNG terminal. The rating factors in favorable order by Central Electricity Regulatory Commission on the recovery of fixed charges from the power distribution entity and also favorable demand scenario in both the domestic power as well as natural gas sector.

The ability of the company to procure the requisite amount of gas at an affordable rate, project stabilization (R-LNG) and effective working capital management would be the key rating sensitivities.

RGPPL is promoted by NTPC Ltd (32.86 per cent), GAIL (India) Ltd (32.86%), MSEB Holding Company Ltd. (MSEBHCL) (17.41%) and domestic banks (IDBI Bank, SBI, ICICI Bank and Canara Bank) (16.87%).