S&P rates National Thermal notes BB

Standard & Poor's said it assigned its BB rating to India's National Thermal Power Corp.'s proposed senior unsecured $200 million bonds.

Proceeds from the bonds are proposed to be used to fund National Thermal's capital expenditure on expanding its electricity generation facilities.

"The main concern for NTPC's cash flow protection remains the financial weakness of its customers - the SEUs [government-owned electricity transmission and distribution utilities] in India. They consistently report operating losses and often face cash flow difficulties - creating persistent and inordinate delays in payment of their financial and contractual obligations," said S&P credit analyst Sharad Jain.

He added, "Nevertheless, this issue has been mitigated through a one-off settlement of old receivables, and implementation of an improved payment collection system for sale of electricity."

"NTPC's rating benefits from its dominant competitive position. The company's take-or-pay arrangement with its customers for sale of electricity ensures capacity payments, subject to maintaining 80% availability of its generating stations. Its operational record suggests that this target will not be onerous for most of its plants," Jain said.

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