S&P retains Adani rating at 'BBB-' with stable outlook

S&P Global Ratings today said it has affirmed its preliminary 'BBB-' long-term corporate credit rating on Adani Transmission Ltd (ATL) on stable outlook.
It also affirmed its preliminary 'BBB-' long-term issue rating on the company's proposed issuance of Indian rupee-denominated senior secured notes.
"The rating on ATL reflects our expectations of stable cash flows driven by a favourable regulatory environment, the company's power transmission business and its good operating record," S&P Global Ratings credit analyst Mehul Sukkawala said in the statement.
However, the company is dependent on two key assets, exposed to somewhat weak counterparties and has a short track record of operations.

"The rating also reflects our expectation that ATL's growth aspirations will be moderated by the company's legal and management commitment to limit the investment and support to new projects," the rating firm said in the statement.
An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obliger to meet its financial commitment on the obligation.
"We believe ATL benefits from a predictable tariff-setting mechanism, which results in stable cash flows. Tariff recovery is linked to network availability and is independent of volumes, protecting ATL from volume risk. It allows the company to recover its fixed costs and earn assured return on equity," the statement said.

The rating agency also said that it has a favourable view of the central regulator CERC (Central Electricity Regulatory Commission) and Maharashtra state regulator MERC (Maharashtra Electricity Regulatory Commission) that administer the tariff for the company's current portfolio of transmission assets.