Singapore, June 02, 2020 -- Moody's Investors Service has today downgraded the following seven Indian
infrastructure issuers by one notch:
1) NTPC Limited (NTPC)
2) NHPC Limited (NHPC)
3) National Highways Authority of India (NHAI)
4) Power Grid Corporation of India Limited (Power Grid)
5) Gail (India) Limited (GAIL)
6) Adani Green Energy Restricted Group (RG-2) comprising of Wardha
Solar (Maharashtra) Private Limited, Kodangal Solar Park Private
Limited and Adani Renewable Energy (Rj) Limited
7) Adani Transmission Restricted Group comprising (ATL RG): (1)
Raipur-Rajnandgaon-Warora Transmission Limited (RRWTL),
(2) Sipat Transmission Limited (STL), (3) Chhattisgarh-WR
Transmission Limited (CWTL), (4) Hadoti Power Transmission Service
Limited (HPTSL), (5) Barmer Power Transmission Service Limited (BPTSL),
and (6) Thar Power Transmission Service Limited (TPSL)
At the same time, Moody's has affirmed the baseline credit
assessments (BCAs) for NTPC and NHPC at baa3, and downgraded the
BCAs for Power Grid and GAIL by one notch to baa3 from baa2.
The outlook on all seven issuers remains negative.
Moody's has also affirmed the ratings of the following four issuers
and revised their outlooks to negative from stable:
1) Adani Ports and Special Economic Zone Limited (APSEZ)
2) Adani Transmission Limited (ATL)
3) Adani Electricity Mumbai Limited (AEML)
4) Azure Power Solar Energy Private Limited (Azure Power RG-2)
These rating actions follow Moody's decision to downgrade India's sovereign
rating to Baa3 from Baa2 with a negative outlook, as announced on
1 June 2020. For full details on India's sovereign rating action
please refer to this announcement:
https://www.moodys.com/research/Moodys-downgrades-Indias-ratings-to-Baa3-maintains-negative-outlook--PR_424605
The above list includes debt-issuing special purpose vehicles.
The total number of downgraded Indian infrastructure companies stated
above excludes the entities listed under Adani Green Energy Restricted
Group and Adani Transmission Restricted Group.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL424920
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL424920
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Principal Methodologies
DOWNGRADE OF RATINGS FOR FIVE GOVERNMENT-RELATED ISSUERS:
NTPC, NHPC, NHAI, POWER GRID AND GAIL
Under Moody's joint default analysis approach for government-related
issuers (GRIs), government support is one of the key considerations
in GRIs' ratings. The ratings and BCAs of these five GRIs are very
sensitive to a decline in the rating of their government owner given their
close links with the Government of India. As a result, each
GRI has been downgraded by one notch, consistent with the downgrade
of the sovereign rating. The BCAs of Power Grid and GAIL have also
been downgraded by one notch to baa3 for the same reason.
The negative outlooks for the five GRIs reflect the negative outlook on
the sovereign rating.
DOWNGRADE OF ADANI GREEN ENERGY RESTRICTED GROUP
The downgrade of Adani Green Energy Restricted Group's ratings reflects
the group's dependence on sovereign-owned entities,
such as Solar Energy Corporation of India, for more than 70%
of the offtake from its power projects. As a result, the
ratings are constrained by the weakening credit profiles of the group's
off-takers.
The negative outlook reflects the negative outlook on the sovereign rating.
DOWNGRADE OF ADANI TRANSMISSION RESTRICTED GROUP
The downgrade of Adani Transmission Restricted Group's ratings reflects
the fact that all of the restricted group's operations are based
in India and thus its ratings are constrained by the sovereign rating.
The negative outlook reflects the negative outlook on the sovereign rating.
AFFIRMATION OF RATINGS AND CHANGE IN OUTLOOK FOR APSEZ, ATL,
AEML AND AZURE POWER RG-2
The affirmation of APSEZ's issuer rating reflects its ability to
withstand the temporary reduction in trade volume and revenue as a result
of the coronavirus outbreak, taking into account the port's
moderate financial profile and robust liquidity position heading into
fiscal 2021, as well as its ability to postpone capital expenditure.
The affirmation of ATL's senior secured bond ratings reflects its
predicable revenue profile that is underpinned by its portfolio of quality
regulated and contracted assets, good operating track record and
high financial leverage after taking into account its substantial capital
expenditure program over the next 2-3 years.
The affirmation of AEML's senior secured bond rating reflects the
predictable revenues from its regulated utility business in Mumbai and
its solid liquidity profile. It also reflects management's
commitment to maintaining appropriate financial metrics supportive of
its credit profile through managing its capital spending over the current
tariff control period.
The negative outlook on APSEZ, ATL and AEML's Baa3 rating
reflects (1) the fact that virtually all of their business operations
are based in India, and (2) their ratings are constrained by the
Baa3 rating and negative outlook on the sovereign.
The affirmation of the rating on Azure Power Solar Energy's backed
senior unsecured bonds considers the group's long-term power
purchase agreements with fixed tariffs and Moody's expectation of
support from Caisse de depot et placement du Quebec (CDPQ, Aaa stable),
the largest shareholder of its parent, in the case of need.
The change in outlook reflects the weakening credit profile of the group's
government-related off-takers.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlooks, the ratings of all 11 infrastructure
issuers are unlikely to be upgraded in near term.
However, Moody's could upgrade the five GRIs' ratings
if the sovereign rating is upgraded and there is no material deterioration
in the GRIs' BCAs.
Similarly, Adani Green Energy Restricted Group and Adani Transmission
Restricted Group's ratings could be upgraded if the sovereign rating
is upgraded and there is no material deterioration in their underlying
credit profiles.
The ratings for APSEZ, AEML, ATL and Azure Power RG-2
could be upgraded (1) if the sovereign rating is upgraded; and (2)
their standalone credit profiles improve significantly, with their
financial metrics strengthening beyond their respective rating parameters.
The outlook for all 11 infrastructure issuers could change to stable from
negative if the outlook on the sovereign rating changes to stable from
negative.
Moody's could downgrade the five GRIs if (1) the sovereign rating
is downgraded or the government's willingness to support them weakens;
and/or (2) the GRIs' BCAs weaken meaningfully, whereby their financial
metrics fall short of their respective rating parameters.
Similarly, Moody's could downgrade the notes issued by Adani
Green Energy Restricted Group and Adani Transmission Restricted Group
if (1) the sovereign rating is downgraded, or (2) their debt service
coverage ratios deteriorate towards 1.30x and 1.35x respectively
on a sustained basis.
APSEZ's rating could be downgraded if the sovereign rating is downgraded
or if cargo volumes decline, resulting in the company's financial
metrics deteriorating beyond the parameters of its Baa3 rating category.
In particular, Moody's would consider downgrading APSEZ if
FFO/debt falls below 14% on a sustained basis and cash interest
coverage below 2.75x-3.00x. A reinstatement
of related-party loans could also strain the rating.
Moody's could downgrade Azure Power RG-2's ratings
if the sovereign rating is downgraded or (1) the credit quality of its
parent Azure Power Global Limited (APGL) deteriorates; (2) its FFO/debt
falls towards 6% on a sustained basis; and/or (3) support
from APGL's shareholders weakens, as reflected by a meaningful decrease
in CDPQ's ownership.
Moody's could downgrade ATL's ratings if the sovereign rating
is downgraded or if there is (1) a weakening in ATL's financial profile
as indicated by its FFO interest coverage ratio falling below 1.75x
or its FFO/net debt staying below 7% on a sustained basis,
(2) a deterioration in ATL's business risk profile, or (3) a reinstatement
of related-party loans.
Moody's could downgrade AEML's rating if the sovereign rating
is downgraded or if there is (1) a weakening in AEML's financial profile
as indicated by its FFO/debt falling below 9% on a consistent basis,
or (2) a delay in the repayment of its existing intercorporate loan or
a reinstatement of related-party loans.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are all solicited credit
ratings. Additionally, the List of Affected Credit Ratings
includes additional disclosures that vary with regard to some of the ratings.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL424920
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Disclosure to Rated Entity
• Endorsement
• Lead Analyst
• Releasing Office
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Abhishek Tyagi
Vice President - Senior Analyst
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
