 "CARE Ratings downgrades Essar Power's credit, debentures")
The rating revision takes into account lower than expected cash flow from operational projects and piling up of receivables due to weakening of credit profile of one of its major customers - Essar Steel India Ltd.
It factors in the impact on cash flows of the consolidated entity due to the unavailability of gas for EPL’s gas-based power plants, likely capital expenditure to convert them to coal-based plant, CARE said.
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The agency pointed out likely delays in tie-up of additional funds for the cost overrun. The debt repayment will commence for most of the projects which are yet to achieve positive cash flows.
The ratings derive strength from the track record and experience of the promoters (Essar Group) in implementing and operating power plants. They also take into account group’s ability to infuse the required equity into various ongoing projects, firm offtake arrangement by way of Power Purchase Agreements (PPAs) for the majority of generation capacity.
The company’s ability to arrange funds in a timely manner for capital expenditure, achieve the desired level of Plant Availability Factor (PAF)/ Plant Load Factor (PLF) and profits remain the key ratings sensitivities.
Druing six months ended September 2013, EPL posted net loss of Rs 274 crore on total income of Rs 1,734 crore.
Essar Power Ltd, a part of the Essar Group, is an Independent Power Producer (IPP) and operates a 515 MW gas-based plant at Hazira in Surat (Gujarat). It supplies 300 MW to Gujarat Urja Vikas Nigam and 215 MW to Essar Steel.
EPL is also the holding company for various power ventures of Essar Group and acts as an investment arm for infusing equity into various SPVs of the group which are in the process of setting up power projects.
The Group’s power portfolio has current operational capacity of 3,910 MW and 990 MW of capacity is under implementation.