Fitch affirms NTPC rating at 'BBB-' with stable outlook

Fitch Ratings today said it has affirmed state-run power producer NTPC's long-term foreign and local-currency issuer default ratings at 'BBB-'.
"The outlook is stable. The agency has also affirmed NTPC's senior unsecured rating of 'BBB-', and the 'BBB-' ratings on its USD 4 billion medium-term note programme," Fitch Ratings said in a statement.
According to the statement, the foreign-currency notes and masala bonds issued under the programme have been affirmed at 'BBB-' and 'BBB-emr', respectively.
It said NTPC's ratings benefit from its dominant market position and regulated business model, which provides certainty of cash flows.
The company has managed its counter-party risk well with 100 per cent collection efficiency for the past 14 years despite the weak financial position of many of its customers.

The company's high capex requirements are likely to lead to negative free cash flows over the next two to three years.

The agency said the developments that may, individually or
collectively, lead to positive rating action include an upgrade of the sovereign rating, provided NTPC's rating linkages with the state remain intact.
It also said the development that may, individually or collectively, lead to negative rating action include a downgrade of India's ratings, weakening in NTPC's standalone credit profile due to higher-than-expected capital expenditure, a significant deterioration in its collection, unfavourable regulatory developments, and net leverage exceeding 5.0x on a sustained basis.

Fitch expects NTPC to generate Rs 137 billion of cash flows in FY18. Its debt maturity in the year stands at Rs 65 billion.
"The company also plans to undertake capex of about Rs 280 billion in FY18. We believe NTPC can secure adequate funding given its strong position in India's power sector and very good access to both international and domestic capital markets," it added.