Rajasthan Seb Rs 300cr Bond Rated A+(So)

Credit Analysis & Research Ltd (CARE) has assigned a A+(SO) rating to the Rs 300 crore bond issue of Rajasthan State Electricity Board (RSEB). There will be a structured payment mechanism through an escrow account and the timely payment of interest and principal will be irrevocably and unconditionally guaranteed by the Government of Rajasthan.

The rating is surprising because RSEB has shown losses in the past five years without government subsidies. As per Section 659 of ESA, it is mandatory for the SEBs to generate a minimum surplus of 3 per cent of the net fixed assets in service at the beginning of the year. However, RSEB has continually incurred losses as tariffs have remained below the average cost of generation and supply.

 

The state government has provided for subsidies to cover the widening gap and achieve the stipulated rate of return. RSEB has a skewed consumer mix with the agricultural and domestic sectors accounting for over 45 per cent of total consumption there by constraining the ability of the government to revise tariffs.

The charge on the central collection account of RSEB for the escrow account shall be subservient to all the charges already created.

The collection amount of RSEB receives payments made by all consumers.

RSEB is currently setting up a 1000 MW thermal plant at Suratgarh which is to be implemented in two stages.

It has also signed power purchasing agreements with independent power producers for a total capacity of 3000 MW.

CARE has withdrawn the rating assigned to the non convertible debenture (NCD) issues of Modern Terry Rowel Ltd (MTTL) and Gujarat NRE Coke Ltd because these companies have not placed the NCDs.

CARE has also downgraded the fixed deposit programme of Modern Syntex Ltd (MSL) and MTTL and the NCD issue of MSL.

The ratings in respect of the fixed deposit programme have been down graded from A to BB+ indicating inadequate protection for interest and principal payments. The NCD programme of MSL has been downgraded from A to BB+.

The fixed deposit programme of Nemi Leasing & Finance Ltd has been assigned a rating of BB, indicating that the instrument is speculative in nature.