Press Release January 29, 2025 SIKKIM URJA LIMITED (ERSTWHILE TEESTA URJA LIMITED) Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	10296.00	ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications	-
Bank Loan Ratings	60.00	-	ACUITE A2+ | Reaffirmed | Rating Watch with Developing Implications
Total Outstanding	10356.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­Acuité has reaffirmed the long term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus)  and short term rating to ‘ACUITE A2+’ (read as ACUITE A two plus) on the Rs. 10356.00 Cr. bank facilities of Sikkim Urja Limited (Erstwhile Teesta Urja Limited). The rating has been placed under Watch with Developing Implications for Acuite to evaluate the impact to be made by Government of Sikkim (GOS) to disinvest their stake in the Sikkim Urja Limited (SUL). Rationale for Recommendation Due to a force majeure event of cloud burst which took place on 3rd October 2023 in the state of Sikkim caused the collapse of hydroelectric dam which halted the operations since then. Prior to this event, the operational performance of the unit remained healthy with high Plant Load Factor (PLF) and Plant Availability Factor (PAF). The company has filed for insurance damages and further expecting receivables from Haryana State Utility DISCOM of approximately Rs. 1500 Cr. for non-operational PPA.  Acuite notes the disinvestment from Government of Sikkim (GOS) its entire stake ~(60%) from Sikkim Urja Limited to Greenko Energies Private Limited (GEPL) will be key monitor to factor. The documentation of share transfer is under process.  The company is reconstructing the whole dam, however approvals from authorities CWC (Central Water Commission & CEA (Central Electricity Authority) are pending and expected in the month of October 2024. The construction of new dam will be done in two stages and will be funded by mix of equity share capital from Greenko Energies Private Limited (GEPL) and fresh funding from lenders (REC & PFC) under terms of resolution plan. The company is expecting to generate revenues from 1st September 2025 after completion of 1st stage which is expected to be operationalized at 65% of total capacity. The final stage (Main Dam) will be completed by 28th February 2029. The rating also factors the PPA's from three DISCOMS (UP, Rajasthan & Haryana) which are still active despite having halt in operations for more than a year.

About the Company

Incorporated in 2005, New Delhi registered Sikkim Urja Limited (SUL) (erstwhile Teesta Urja Limited (TUL) is promoted by Government of Sikkim (GoS)/ Sikkim Power Investment Corporation Limited (SPICL) holding 60.08 per cent stake. The company is engaged in hydro power generation and has set up 1,200 MW Teesta Stage III hydroelectric electric project in Sikkim. The project was commissioned in February 2017. However, presently not operational due to the force majeure event in Sikkim since October 2023. SUL has entered into Power Purchase Agreement (PPA) for 35 years with PTC India Limited (PTC) for sale of entire saleable power out of which 70 percent of the power is to be sold under long term basis and balance 30 percent to be sold on short term basis. PTC has entered into Power Sale Agreement (PSA) with four states, Punjab, Haryana, Uttar Pradesh and Rajasthan.

Unsupported Rating

­Not Applicable.

Analytical Approach

A­cuité has considered the standalone business and financial risk profiles of SUL to arrive at this rating.

Key Rating Drivers

Strengths

­Strategically important entity for GOS and SPICL SUL is a strategically important entity for the state of Sikkim for ensuring uninterrupted power generation and is 60.08 percent owned by GOS/SPICL. SUL has set up the 1,200 MW Teesta Stage III hydroelectric electric project, which is the second largest hydro power project in India.  Acuité believes that since the reconstruction of the whole dam under the new management will be key monitorable in near to medium term.  ­Revenue visibility backed by long term PPA's Despite having operations halted for more than 1 year, PPA (Power Purchase Agreement) from UP, Rajasthan & Haryana DISCOMS are still active. The company will start generating revenues once the first stage (Coffer Dam) gets operationalized. Out of total 1200 MW capacity, 840 MW is tied up against the PPAs. The balance will be sold in energy exchanges on merchant rates.

Weaknesses

­Uncertainty over Insurance Claim & Expected Receivables from Haryana DISCOM There is always uncertainty regarding the insurance claim against the damages which includes both business and asset loss. As per the management, the insurance claim will be utilized for repaying debt servicing and construction of new dam. Acuite believes that timely insurnace claim and upto what extent will be key monitorable for the company.  The company is expecting Rs. 1,535 Cr. from Haryana State Utility for non-operational of PPA as CERC & APTEL (Appellate Tribunal for Electricity) gave order in the favour of Sikkim Urja Limited. However, due to natural disaster SUL has been asked to give Bank Guarantee against it.

Rating Sensitivities

Share transfer from GOS to GEPL. Timely execution of reconstruction of new dam. Receivables from Haryana State Utility DISCOM & insurance claim.

Liquidity Position

Adequate

­The liquidity position of the company is adequate marking net cash accruals against the maturing debt obligations of the current year. Currently having irrevocable and unconditional guarantee upto an extent of Rs. 375 Cr. for the loans borrowed by SUL from REC and PFC, which provides financial flexibility to the company. Further having DSRA of equivalent to 1.3 times debt servicing obligation of one quarter as per the sanction terms provides further comfort to the lenders. Also expected proceeds from insurance company and Haryana State Utility Discom may ease out liquidity for the company. Acuité believes that going forward the liquidity position of the company will remain adequate backed by irrevocable and unconditional guarantee.

Outlook: ­Not Applicable.

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Other Factors affecting Rating

­None.

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	2599.58	3108.53
PAT	Rs. Cr.	(456.77)	1274.24
PAT Margin	(%)	(17.57)	40.99
Total Debt/Tangible Net Worth	Times	2.46	2.47
PBDIT/Interest	Times	1.30	3.13

Status of non-cooperation with previous CRA (if applicable)

­Not Applicable.

Any other information

­None.

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm

Note on complexity levels of the rated instrument

­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 16 Oct 2024 Bank Guarantee (BLR) Short Term 36.00 ACUITE A2+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A1) Bank Guarantee (BLR) Short Term 13.00 ACUITE A2+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A1) Bank Guarantee (BLR) Short Term 11.00 ACUITE A2+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A1) Working Capital Demand Loan (WCDL) Long Term 94.00 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) Working Capital Demand Loan (WCDL) Long Term 33.00 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) Working Capital Demand Loan (WCDL) Long Term 28.00 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) Term Loan Long Term 3351.85 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) Term Loan Long Term 3351.61 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) Proposed Long Term Bank Facility Long Term 3437.54 ACUITE BBB+ (Downgraded (Rating Watch with Developing Implications) from ACUITE A | Stable) 19 Jul 2023 Working Capital Demand Loan (WCDL) Long Term 94.00 ACUITE A | Stable (Upgraded from ACUITE A- | Stable) Working Capital Demand Loan (WCDL) Long Term 33.00 ACUITE A | Stable (Upgraded from ACUITE A- | Stable) Working Capital Demand Loan (WCDL) Long Term 28.00 ACUITE A | Stable (Upgraded from ACUITE A- | Stable) Term Loan Long Term 5067.89 ACUITE A | Stable (Upgraded from ACUITE A- | Stable) Term Loan Long Term 5073.11 ACUITE A | Stable (Upgraded from ACUITE A- | Stable) Bank Guarantee (BLR) Short Term 36.00 ACUITE A1 (Upgraded from ACUITE A2+) Bank Guarantee (BLR) Short Term 13.00 ACUITE A1 (Upgraded from ACUITE A2+) Bank Guarantee (BLR) Short Term 11.00 ACUITE A1 (Upgraded from ACUITE A2+) 21 Apr 2022 Working Capital Demand Loan (WCDL) Long Term 94.00 ACUITE A- | Stable (Upgraded from ACUITE BBB+ | Stable) Working Capital Demand Loan (WCDL) Long Term 33.00 ACUITE A- | Stable (Upgraded from ACUITE BBB+ | Stable) Working Capital Demand Loan (WCDL) Long Term 28.00 ACUITE A- | Stable (Upgraded from ACUITE BBB+ | Stable) Term Loan Long Term 5067.89 ACUITE A- | Stable (Upgraded from ACUITE BBB+ | Stable) Term Loan Long Term 5073.11 ACUITE A- | Stable (Upgraded from ACUITE BBB+ | Stable) Issuer Rating Long Term 0.00 ACUITE A- (IR) (Upgraded & Withdrawn from ACUITE BBB+ (IR) | Stable) Bank Guarantee (BLR) Short Term 36.00 ACUITE A2+ (Upgraded from ACUITE A2) Bank Guarantee (BLR) Short Term 13.00 ACUITE A2+ (Upgraded from ACUITE A2) Bank Guarantee (BLR) Short Term 11.00 ACUITE A2+ (Upgraded from ACUITE A2) Proposed Non Convertible Debentures Long Term 11028.00 ACUITE Provisional A- (Upgraded & Withdrawn from ACUITE BBB+ | Stable)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Punjab National Bank Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 36.00 Simple ACUITE A2+ | Reaffirmed | Rating Watch with Developing Implications Canara Bank Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 13.00 Simple ACUITE A2+ | Reaffirmed | Rating Watch with Developing Implications Bank of Baroda Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 11.00 Simple ACUITE A2+ | Reaffirmed | Rating Watch with Developing Implications Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3437.54 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications Rural Electrification Corporation Ltd. Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 Mar 2047 3351.85 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications Power Finance Corporation Ltd. Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 Mar 2047 3351.61 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications Punjab National Bank Not avl. / Not appl. Working Capital Demand Loan (WCDL) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 94.00 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications Canara Bank Not avl. / Not appl. Working Capital Demand Loan (WCDL) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 33.00 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications Bank of Baroda Not avl. / Not appl. Working Capital Demand Loan (WCDL) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 28.00 Simple ACUITE BBB+ | Reaffirmed | Rating Watch with Developing Implications

Contacts

Mohit Jain Senior Vice President - Rating Operations Kartik Arora Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.