Adani Power Maharashtra Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 16534.00 Crs. of Adani Power Maharashtra Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (12 Apr 2022)	Present
Fund Based	12760.00	12440.00	Long Term	BWR A /Credit watch with developing implications Reaffirmation	BWR A /Credit Watch with Developing Implications Reaffirmation
	2500.00	3000.00	Short Term	BWR A2+ Reaffirmation	BWR A2 + Reaffirmation
Non Fund Based	1128.00	1094.00	Long Term	BWR A/Credit watch with developing implications Reaffirmation	BWR A /Credit Watch with Developing Implications Reaffirmation
	146.00	0.00	Short Term	BWR A2+ Reaffirmation	_
Grand Total	16534.00	16534.00	(Rupees Sixteen Thousand Five Hundred Thirty Four Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has reaffirmed the ratings of BWR A (Credit Watch with Developing Implications)/A2+ for the bank loan facilities of Adani Power Maharashtra Ltd (APML or the company).

The reaffirmation factors in the strong parentage of APML, availability of domestic coal for nearly the entire fuel requirement through FSA/linkages and Inter-Plant Transfer (IPT) from Adani Power (Mundra) Ltd (APMuL), offtake agreements for the entire power generation capacity (net of auxiliary consumption) involving a two-part tariff structure, along with a moderate counterparty risk, the receipt of favourable interim orders from the Supreme Court of India for compensation on account of the deallocation of Lohara coal block related to 800 MW capacity and compensation on account of a shortage of domestic coal due to the amendment in the NCDP Policy and realisation of a substantial amount against the claims raised in FY22 and Q1FY23. The rating also takes note that the company has created a DSRA to the satisfaction of lenders. The rating, however, is constrained on account of the strained working capital position due to advance payments to Coal India Ltd and its subsidiaries.

The ratings have been placed under Credit Watch with Developing Implications in view of the recent announcement made by its parent company Adani Power Limited regarding the approval of the amalgamation scheme of various wholly owned operational subsidiaries with Adani Power Limited (APL). The amalgamation is expected to translate into synergistic benefits in the form of enhanced operational, organisational and financial efficiencies. BWR will keep a track of developments in this regard and shall review the rating when greater clarity in respect of the same emerges.

KEY RATING DRIVERS

Credit Strengths:

• Strong promoter group :

  The company is a wholly owned subsidiary of APL, Adani Group’s flagship company in the thermal power generation segment. The promoters have a long track record in the power sector and have been supporting all the subsidiaries by way of infusing necessary funds at regular intervals. APL is one of the largest Independent Power Producers (IPP) in the country with a portfolio of 16.85 GW generation capacity (including the under-construction capacity of 3.2 GW). While the plant has become self-sustainable and is no longer reliant on funding from promoters, need-based support from the group, in the case of any eventuality in future, has been factored in while arriving at the ratings.

• FSA in place :

  The company requires a minimum fuel supply of 13.50 MTPA to operate the plant at a normative level (availability factor of 85%). The company received a Fuel Supply Arrangement (FSA) from SECL for 4.91 MTPA (now enhanced to 5.46 MTPA), which was insufficient to meet the requirement; thus, the company entered an agreement with APMuL for the inter-party transfer of 6.40 MTPA coal from the linkages received by APMuL from mines located near APML’s plant. The same was also approved by Coal India Ltd. The balance requirement, however, continued to be met from e-auctions/imported coal. Subsequently, the company received linkages for 5.85 MTPA under SHAKTI during August 2017, and supply commenced from April 2018, resulting in lower reliance on e-auctioned/imported coal. It also helped in lowering the average cost per tonne of coal, thereby improving the company’s profitability.

• Off-take agreements for entire capacity (net of auxiliary consumption) :

  APML has entered Power Purchase Agreements (PPAs) for 3085 MW (net of auxiliary consumption) with  MSEDCL at a two-part tariff structure - fixed charge + variable charge. The company will be able to recover the fixed charge if the plant is available at the normative availability factor.  MSEDCL has also opened a monthly revolving letter of credit with APML as a payment security mechanism in compliance with the regulatory requirement. Furthermore, with respect to PPAs entered for 60% of the company’s capacity, it is eligible to receive an escalation in tariff on account of changes in energy charges and the inland transportation cost linked to the CERC index. Additionally, the PPAs have a validity for another ~ 17 years, lending adequate revenue visibility over the long term.

• Consistent operational performance :

  Post receiving coal linkages under SHAKTI, the company’s operational performance has reported a considerable improvement. The Plant Availability Factor (PAF) consistently improved over the last few years. The Plant Load Factor (PLF) improved considerably during FY19 to FY22, except in FY21, wherein it declined on account of a fall in power demand due to the Covid-19 pandemic; the company was able to recover the entire fixed costs on account of the maintenance of the PAF at above-normative levels.

• Realisation of substantial amount towards compensatory tariff dues :

  APML received favourable interim orders from the Supreme Court of India for its regulatory claims pertaining to 2,500 MW and 800 MW PPAs from MSEDCL. Accordingly, MSEDCL has made part payment to the tune of Rs. ~6400 Crs in Q1FY23.

Credit Risks:

• Strained working capital position :

  To procure coal under the linkages, the company is required to make advance payments to Coal India Ltd and its subsidiaries. The management has confirmed that it is receiving the dues related to regular power supply from MSEDCL within the agreed credit period, and the company’s average working capital utilisation remained ~80% during the FY22. With the realisation of earlier dues, the average utilisation is expected to come down in due course.

ANALYTICAL APPROACH - Standalone

To arrive at the rating, BWR has analysed the company on a standalone basis. The terms of the PPAs, project parameters, audited financials until FY22 and financial projections of the company have been taken into account. The expectation of timely and need-based support from the promoters is also factored in while arriving at the rating.

The methodology applied by BWR is highlighted and mentioned at the end.

RATING SENSITIVITIES

Upward: A favourable final order from the Supreme Court for the civil appeal filed by MSEDCL and the realisation of the outstanding claims with respect to the total CT dues including both 2500 MW and 800 MW capacities

Downward: A deterioration in the PAF, impacting revenue, as well as profitability, and a deterioration in the payment cycle for regular power dues from the MSEDCL

 

LIQUIDITY INDICATORS - Adequate

The company’s cash and cash equivalents were Rs. 1417 Crs as of June 2022. Against this, the company’s current portion of  long-term debt is at ~ Rs. 1200 Crs, which the company should be able to service. Moreover, a DSRA has been created to the satisfaction of lenders. The company has sanctioned working capital limits of Rs. 2734 Crs, for which the average utilisation has remained at ~80% in the past year. Nonetheless, the company has received part payment from MSEDCL towards regulatory dues based on the interim orders from the Supreme Court of India and expects favourable final orders too. The receipt of regulatory dues from MSEDCL will improve the company’s liquidity position substantially. Additionally, the company extended loans to related parties amounting to Rs. ~6100 Crs as of June 2022, which adds strength to liquidity profile as this amount is expected to be available  in the case of any  liquidity constraint.

ABOUT THE ENTITY

Incorporated in April 2007, Adani Power Maharashtra Limited (APML) was floated as a wholly owned subsidiary of Adani Power Limited to implement a 3300-MW supercritical, domestic coal-based thermal power generation plant at Tiroda in Maharashtra. The project was implemented in three phases – Phase I (2 x 660 MW), Phase II (1 x 660 MW) and Phase III (2 x 660 MW). These units became operational between September 2012 and October 2014. APML has entered long-term PPAs with MSEDCL for 3085 MW capacity (net of auxiliary consumption), of which the PPA for 440 MW became operational mid-February 2017 onwards.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	9412.80	10024.01
EBITDA	Rs.Crs.	2582.45	5647.09
PAT	Rs.Crs.	1024.48	3667.22
Tangible Net Worth	Rs.Crs.	8657.75	7634.07
Total Debt/TNW	Times	1.38	1.83
Current Ratio	Times	1.66	1.49

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2022 (History)		2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	12440.00	BWR A/Credit Watch with Developing Implications (Reaffirmation)	12Apr2022	BWR A Credit watch with developing implications (Reaffirmation)	21Jul2021	BWR A Stable (Reaffirmation)	02Jul2020	BWR A Stable (Reaffirmation)	30Mar2019	BWR A Stable (Reaffirmation)
Fund Based	ST	3000.00	BWR A2+ (Reaffirmation)	12Apr2022	BWR A2+ (Reaffirmation)	21Jul2021	BWR A2+ (Assignment)	NA	NA	NA	NA
Non Fund Based	LT	1094.00	BWR A/Credit Watch with Developing Implications (Reaffirmation)	12Apr2022	BWR ACredit watch with developing implications (Reaffirmation)	21Jul2021	BWR A Stable (Reaffirmation)	02Jul2020	BWR A Stable (Reaffirmation)	30Mar2019	BWR A Stable (Reaffirmation)
Non Fund Based	ST	0.00	NA	12Apr2022	BWR A2+ (Reaffirmation)	21Jul2021	BWR A2+ (Reaffirmation)	02Jul2020	BWR A2+ (Reaffirmation)	30Mar2019	BWR A2+ (Reaffirmation)
Grand Total		16534.00	(Rupees Sixteen Thousand Five Hundred Thirty Four Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Power Generation Projects

Analytical Contacts
Shamkant Dattatray Deshmukh Ratings Analyst shamkant.d@brickworkratings.com	Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Allahabad Bank	CECL - Out-standing	3.15	_	3.15
2	Bank of Baroda	CECL - Out-standing	_	_	0.00
3	Bank of Baroda	Term Loan - Out-standing	751.95	_	751.95
4	Bank of Baroda	Cash Credit - Sanctioned	310.00	_	310.00
5	Canara Bank	Cash Credit - Sanctioned	240.00	_	240.00
6	Canara Bank	Term Loan - Out-standing	634.17	_	634.17
7	Canara Bank	Bill Discounted (BD) - Sanctioned	_	_	0.00
8	Canara Bank	Bank Guarantee - Sanctioned	85.00	_	85.00
9	Central Bank of India	Term Loan - Out-standing	81.11	_	81.11
10	China Development Bank	External Commercial Borrowings - Out-standing	_	_	0.00
11	ICICI Bank	Cash Credit - Sanctioned	300.00	_	300.00
12	IDBI Bank	Cash Credit - Sanctioned	_	_	0.00
13	IDBI Bank	Term Loan - Out-standing	_	_	0.00
14	India Infrastructure Finance Company (UK) Limited	External Commercial Borrowings - Out-standing	275.81	_	275.81
15	India Infrastructure Finance Company Limited	Term Loan - Out-standing	1166.84	_	1166.84
16	Indian Bank	Term Loan - Out-standing	250.04	_	250.04
17	Indian Bank	Cash Credit - Sanctioned	80.00	_	80.00
18	Indian Bank	Bill Discounted (BD) - Sanctioned	_	_	0.00
19	Indian Bank	CECL - Out-standing	_	_	0.00
20	Indian Overseas Bank	Term Loan - Out-standing	98.48	_	98.48
21	Indian Overseas Bank	Cash Credit - Sanctioned	100.00	_	100.00
22	Industrial and Commercial Bank of China Limited	External Commercial Borrowings - Out-standing	_	_	0.00
23	Jammu and Kashmir Bank	Cash Credit - Sanctioned	50.00	_	50.00
24	Jammu and Kashmir Bank	Term Loan - Out-standing	82.85	_	82.85
25	Life Insurance Corporation of India	Term Loan - Out-standing	348.83	_	348.83
26	Others	Cash Credit - Proposed	366.00	_	366.00
27	Others	Bill Discounted (BD) - Proposed	_	3000.00	3000.00
28	Others	External Commercial Borrowings - Out-standing	_	_	0.00
29	Others	Cash Credit - Proposed	1534.98	_	1534.98
30	Others	Bank Guarantee - Proposed	_	_	0.00
31	Punjab & Sind Bank	Term Loan - Out-standing	123.29	_	123.29
32	Punjab National Bank	Cash Credit - Sanctioned	250.00	_	250.00
33	Punjab National Bank	Term Loan - Out-standing	643.12	_	643.12
34	Standard Chartered Bank	External Commercial Borrowings - Out-standing	_	_	0.00
35	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	132.00	_	132.00
36	State Bank Of India (SBI)	CECL - Out-standing	_	_	0.00
37	State Bank Of India (SBI)	Term Loan - Out-standing	2402.80	_	2402.80
38	State Bank Of India (SBI)	Cash Credit - Sanctioned	1053.00	_	1053.00
39	State Bank Of India (SBI)	Bill Discounted (BD) - Sanctioned	_	_	0.00
40	Tamilnad Mercantile Bank Limited	Cash Credit - Sanctioned	_	_	0.00
41	Tamilnad Mercantile Bank Limited	Term Loan - Out-standing	_	_	0.00
42	UCO Bank	Term Loan - Out-standing	279.11	_	279.11
43	UCO Bank	Cash Credit - Sanctioned	100.00	_	100.00
44	UCO Bank	GECL - Out-standing	_	_	0.00
45	Union Bank of India	CECL - Out-standing	_	_	0.00
46	Union Bank of India	Bank Guarantee - Sanctioned	248.00	_	248.00
47	Union Bank of India	Cash Credit - Sanctioned	251.00	_	251.00
48	Union Bank of India	Term Loan - Out-standing	663.47	_	663.47
49	Yes Bank	Bank Guarantee - Sanctioned	629.00	_	629.00
Total			13534.00	3000.00	16534.00
TOTAL (Rupees Sixteen Thousand Five Hundred Thirty Four Crores Only)