Fitch rates NTPC's proposed USD 4-bn notes secure

Fitch Ratings has assigned 'BBB' rating to state-run power producer NTPC's proposed USD 4 billion medium-term note programme.
"Fitch Ratings has affirmed NTPC Limited's (NTPC) long-term issuer default rating at 'BBB-'. The outlook is stable.
"At the same time, the agency has affirmed NTPC's senior unsecured rating of 'BBB-' and the 'BBB-' ratings on its USD 4 billion medium-term note programme," the rating agency said in a statement.
The BBB rating is considered secure by Fitch.
According to the statement, NTPC's ratings benefit from its regulated business model, which provides certainty of cashflows, and its dominant market position.
It said that the company has managed its counter-party risk well with 100 per cent collection efficiency for the past 12 years despite the weak financial position of many of its customers.

However, it said, the company's high capex requirements are likely to lead to negative free cash flows over the next three to four years.

The high capex and the bonus debenture issue of Rs 103 billion in the financial year ended March, 2015 led to an increase in the leverage to 4.43x at FY15 from 2.97x at FY14 and has led to a weakening of the company's standalone credit profile, it added.
According to Fitch, the company has dominant market position as it is the largest power generation company in India, accounting for a fourth of the total power generated in the country.

Of India's total installed power generation capacity of 269 gigawatts (GW), around two-thirds is thermal, while NTPC accounts for 23 per cent of India's thermal power generation capacity.
As per Fitch, the company has robust business model as it has stable operational cash flows due to favourable regulatory framework.
The company has long-term power purchase agreements (PPAs) for all its plants, which allow for the pass-through of fixed costs as well as fuel costs.
Offtake risks are limited as the fixed costs for each plant are payable by the customers if the plant has achieved the regulatory benchmark availability, it added.