Icra cuts R-Power's commercial paper rating

Rating agency Icra has cut the rating for Reliance Power Ltd’s commercial paper (of Rs 1,000 crore) from A1+ to A1 on increased business risk profile of the company.

The rating revision takes into account the rise in risks associated with the power projects being executed through majority-owned special purpose vehicles (SPVs) and large corporate guarantee exposure to Samalkot Power Ltd (SPL).

The concerns related to gas availability for projects have increased in the last one year, Icra said.

The corporate guarantee for debt raised for the Samalkot project in Andhra Pradesh has been provided till such time that the gas allocation and long-term power purchase agreement (PPA) are finalised to the satisfaction of lenders.

There is significant uncertainty over the allocation and quantum of gas availability due to a steep decline in domestic gas availability and pending implementation of recommendations made by panel on gas pooling.

Icra revised long-term rating from A to A- that carries stable outlook. The short-term rating stands revised from A1+ to A1.

The ratings, however, continue to draw strengths from the company’s strong capitalisation and satisfactory financial flexibility as demonstrated in its ability to tie up loans at favourable terms with domestic and overseas lenders, Icra said.

Icra said it drew comfort from the fact the Samalkot project would have priority in gas allocation by virtue of its status as a 11th Plan project. The debt raised for funding the Samalkot project has a moratorium of two years after commercial operations date, giving the company some cushion in finalising the gas supply agreements.

Reliance Power’s shares on Monday lost 2.96 per cent to close at Rs 83.65 on BSE, while the benchmark Sensex shed 0.59 per cent to end trade at 17,678.81 points.