Fitch assigns issuer default rating of 'BBB-' to Power Grid

Fitch Ratings today said it has assigned Power Grid a long-term local currency issuer default rating (IDR) of 'BBB-', which is at the same level as its long-term foreign currency IDR.
The outlook is stable. Fitch assesses Power Grid's standalone profile at 'BBB', it said in a statement.
Fitch's credit ratings range from AAA to D, where triple-A indicates high ability to repay debt while D indicates the least.
It said that Power Grid's ratings benefit from its strong market position. The company owns and operates around 85 per cent of India's inter-regional and inter-state electricity transmission network assets.
Revenue from existing operational transmission assets is based on a return on equity of 15.5 per cent and full pass- through of all fixed costs within regulatory norms, including interest charges.

India's new transmission projects have only been awarded through tariff-based competitive bidding since 2011, except for certain projects of strategic importance, technical upgrades or urgent requirements, which are awarded directly to Power Grid, it said.

Power Grid has had 11 projects awarded through the bidding scheme and aims to complete 10 of them (one project has been discontinued) by 2020. Returns from tariff-based bidding projects are less protected than from existing operational assets under a cost-plus tariff model, it said.
However, Fitch does not expect these projects to account for more than 5 per cent of Power Grid's revenue in the medium term.

Power Grid commissioned Rs 32,000 crore of projects in FY17, exceeding Fitch's expectations, and plans total capex of about Rs 25,000 crore per year over the next three years, it added.