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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 2565.97 | ACUITE A- | Stable | Assigned | - |
| Bank Loan Ratings | 3999.00 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 350.00 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 6914.97 | - | - |
| Rating Rationale |
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Acuité has assigned and reaffirmed the long term rating of ‘ACUITE A-’ (read as ACUITE A minus) and reaffirmed short term rating of ‘ACUITE A2+’ (read as ACUITE A two plus) to the Rs.6914.97 Cr bank facilities of The West Bengal Power Development Corporation Limited (WBPDCL). The outlook remains ‘Stable’.
Rating Rationale The rating considers the stable business risk profile of the company marked by a cost plus based tariff mechanism and assured offtake on account of power purchase agreement with WBSEDCL (rated at ACUITE BBB/Stable/A3+). Acuité also derives comfort from the steady fiscal position of the Government of West Bengal, which is expected to provide significant support to WBPDCL, as and when necessary. These strengths are, however, partly offset by the inherently regulated nature of operations in the electricity generation business and the counterparty exposure to the state distribution entity, WBSEDCL, which has a relatively weaker credit profile. |
| About the Company |
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Incorporated in 1985, The West Bengal Power Development Corporation Limited (WBPDCL) is a wholly owned undertaking of the state government of West Bengal. The company is engaged in the business of thermal power in the state. Currently, WBPDCL operates and maintains 20 units at 5 locations, Kolaghat, Bandel, Bakreswar, Santaldih and Sagardighi. The installed capacity of Kolaghat Thermal Power Station is 1260 MW, Bakreshwar Thermal Power Station is 1050MW, Sagardighi Thermal Power Project is 1600MW, Bandel Thermal Power Station is 335 MW and Santaldih Thermal Power Station is 500 MW. WBPDCL supplies all its power to West Bengal State Electricity Distribution Company Limited (WBSEDCL).
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| Standalone (Unsupported) Rating |
| ACUITE BBB-/Stable |
| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of WBPDCL to arrive at the rating. Acuité has also factored in benefits emanating from the ownership by Government of West Bengal. GoWB’s financial support to WBPDCL is in the form of its 100 per cent ownership and its guarantee for certain borrowings of WBPDCL.
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Key Rating Drivers
| Strengths |
| Strategically important entity and support from the government of West Bengal
WBPDCL is a wholly-owned undertaking of the GoWB and a strategically important entity of the power sector infrastructure for the state of West Bengal. The ownership structure provides adequate financial flexibility. It is also the nodal agency of the government for undertaking power generation activity in the state. Being the power generation licensee by WBERC, WBPDCL is mandated to ensure the generation of power from its installed capacity and supply the same to WBSEDCL. WBPDCL's credit profile is also supported by its access to funds at low cost and its ability to mobilise financial resources from several financial institutions and multilateral development institutions. The rating factors in the financial flexibility of WBPDCL. West Bengal has been one of the fastest-growing states in India and is the sixth-largest state economy in India with gross state domestic product (GSDP) growing at 18.10 per cent in 2021-22. While the state’s revenue deficit has been relatively modest at 2.15 per cent, its fiscal deficit stood at 3.48 per cent in 2021-22. GoWB has significantly increased its focus on increasing industrial development in the state, which gets reflected from the improving FDI inflows onto the state. However, the state’s overall borrowing level continues to remain high and is a challenge to its overall fiscal profile. Acuité believes that WBPDCL, being a 100 per cent undertaking of GoWB, shall continue to benefit from the financial, operational and management support as and when required. The GoWB has demonstrated financial support by way of loans to WBPDCL on a regular basis. Any changes in the ownership pattern of WBPDCL or any event that impinges GoWB's overall credit profile shall remain a key rating sensitivity. Assured offtake account on PPA There is a power purchase agreement between WBSEDCL and WBPDCL for 15 years upto 2026. As per the agreement, the entire generating capacity of WBPDCL is allotted to WBSEDCL. WBSEDCL shall purchase such power as per terms conditions set forth in the agreement. Acuité believes that going forward the long term agreement will continue to ensure assured offtake of the company. Inbuilt ‘cost plus tariff’ structure The billing of generation charges of WBPDCL are regulated and required the Annual Revenue Requirement (ARR) under ‘cost-plus’ based tariff mechanism. The regulator, WBERC allows a post-tax return on equity of 15 per cent and other uncontrollable expenses are allowed to be passed through in tariff through Annual Performance Review (APR) process. Acuité derives comfort from the cost plus based tariff mechanism. Steady business risk profile WBPDCL has achieved revenues of Rs. 10,249.52 Cr in FY2022 as compared to Rs. 9,453.24 Cr in FY2021. Further, the company has achieved a revenue of Rs.5797.11 Cr. The increase in revenue is primarily due to increase in generation of power, which is in turn on account of usage of 68 per cent of required coal from captive coal mines. Acuité believes that the business risk profile is strengthened by the increase in usage of captive coal, going forward, which is expected to be increase further.
Moreover, the cost plus tariff model has translated into steady EBITDA margin for the company of about 18.91 per cent in FY2022. The profitability is driven by superior in Plant Availability Factor (PAF) of 85.59 per cent in FY2022 compared to 78.43 per cent in FY2021, and other operating efficiencies namely reduced oil consumption rate with respect to the normative rate and reduction of boiler tube leakage and reduction in unit tripping. |
| Weaknesses |
| Regulated nature of operations
The revenues are influenced by the regulatory framework governing the power sector. Revenues of players such as WBPDCL are determined by West Bengal Electricity Regulatory Commission (WBERC). The company operates through a cost-plus return on equity model laid down by WBERC. Any significant delays in tariff approvals or a reduction in return on equity or a tightening of the WBERC norms could result in lower operating cash flows. Acuité believes that any significant change in the regulatory environment will impinge on the credit profile of the company. |
| ESG Factors Relevant for Rating |
| Not Applicable |
| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The state government of West Bengal has given guarantee for certain borrowings of WBPDCL; which provides financial flexibility to the company. Further, the company’s liquidity is adequate marked by the high amount of cash and bank balances of Rs.119.68 Cr as on March 31, 2022 and investment in fixed deposits and other deposits of Rs.3537.54 Cr as on March 31, 2022. However, the current ratio stood moderate at 1.16 as on March 31, 2022. The net cash accruals stood at Rs.1003.40 Cr in FY2022, which is insufficient against debt repayment obligation of Rs.1682.48 Cr for the same time period.The differential payment had been done from the internal resources of the company. The fund based limit remains highly utilised at around 91 per cent over the six months ended February, 2023. Acuité believes that going forward the liquidity position of the company will improve backed by the gradually improving accruals.
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| Outlook: Stable |
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Acuité believes that the company will maintain 'Stable' outlook over the medium term due to the assured offtake on account of PPA with WBSEDCL along with its strategic importance and the support provided by the state government. The outlook may be revised to 'Positive' in case of significant improvement of the financial risk profile, liquidity position and its revenue level. Conversely, the outlook may be revised to 'Negative' in case of any unexpected deterioration in the financial profile, elongation of working capital cycle or any significant pressures on the fiscal position of the state government.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 10249.52 | 9453.24 |
| PAT | Rs. Cr. | 289.20 | 569.04 |
| PAT Margin | (%) | 2.82 | 6.02 |
| Total Debt/Tangible Net Worth | Times | 1.64 | 1.28 |
| PBDIT/Interest | Times | 2.26 | 2.34 |
| Status of non-cooperation with previous CRA (if applicable) |
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None
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| Any other information |
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None
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm |
| Note on complexity levels of the rated instrument |
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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.
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