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Jaiprakash Power Ventures - Ratings upgrade by CARE

  CARE Ratings Limited has revised (upgraded from 'D' to 'BB-') its ratings on Long t


CARE Ratings Limited has revised (upgraded from 'D' to 'BB-') its ratings on Long term Bank Facilities of the Company as below:

Facility: Long term
Amount: INR 5,850.70 Crores
Previous Rating: CARE D
New Rating: CARE BB-
Outlook: Stable

The previous ratings are withdrawn as Bank facilities rated were the debt prior to the execution of the Framework Agreement of the resolution plan. As the characteristics of the facility has now substantially changed in accordance to the resolution plan, the outstanding rating has been withdrawn and subsequently, rating has been re-assigned to the outstanding debt.

Detailed Rationale & Key Rating Drivers
The rating re-assigned to the bank facilities of JPVL takes into account the delay free track record of more than three months in servicing of debt obligations of the company. The rating also factors in conversion of unsustainable portion of debt into Cumulative Convertible Preference Shares (CCPS) and Compulsory Redeemable Preference Shares (CRPS) in accordance to the resolution plan. The rating also takes into account the firm Fuel supply Agreements (FSA) for its thermal plants and healthy operational performance to the extent of its contracted capacity.

The ratings are however constrained by significant installed capacity not tied with Power Purchase Agreement (PPA) exposing the cash accruals to the fluctuation in merchant market. The ratings also factors in the under recovery of energy charge from Nigrie super thermal power plant (JNSTPP) and the associated counter party risk upon sale of power to Uttar Pradesh Power Corporation Limited (UPPCL) and MP Power Management Company Ltd (MPPMCL) which have relatively weaker financial profile.

Rating Sensitivities
Positive Factors

  • Increase in long term PPA tie up to more than 85% for the installed capacity.
  • Better realization on sale of power through merchant basis, significantly improving cash accrual on sustained basis.

Negative Factors

  • Poor sales volume and realization on merchant basis, leading to deteriorating cash accrual.
  • Significant deterioration in average collection period on sustained basis.

Full read: JP POwer Ratings upgrade by CARE.pdf (1.17 mb)