India Ratings has assigned West Bengal State Electricity Transmission Company Ltd (WBSETCL) a long-term issuer credit rating of ‘IND A’ with stable outlook. The State-owned unlisted utility, according to the agency, achieved a “high operating efficiencies with a network availability of above 99 per cent over FY09-FY12”. It also recorded a low transmission loss of around 3 per cent. The rating also reflects low business risks in a regulated tariff regime, despite regulatory uncertainty continuing to weigh on certain tariff dues and a time lag in tariff fixation, India Ratings said.
WBSETCL was incorporated in April 2007, post unbundling of erstwhile West Bengal State Electricity Board (WBSEB) on functional lines in line with the requirement under Electricity Act 2003. It is responsible for transmitting power at 400KV, 220KV, 132KV and 66KV throughout the State.
The ratings also consider the expected improvement in financials due to the finalisation of multi-year tariff order for FY12-FY14 in December 2012; margin is expected to increase in FY13 leading to an improvement in credit metrics, with net leverage going below 4x and interest coverage above 3x.
The rating considered fact that WBSETCL has a single counterparty, West Bengal State Electricity Distribution Co Ltd, contributing over 90 per cent to its revenue.
But, it felt that “the counterparty risk is mitigated by the criticality of WBSETCL’s services as well as the relatively smaller size of the payment, as transmission charges are only 5-6 per cent of the revenue of the distribution company”.
The rating also factors in the plans for expansion in network capacity, which would be funded to the extent of 70 per cent by debt.
It also noted that a rating downgrade might result from delays in fixation of tariff beyond FY14 or delays in realisation of receivables from WBSEDCL resulting in deterioration of liquidity and net leverage.