(The following was released by the rating agency)
SINGAPORE (Standard & Poor's) Sept. 24, 2012--Standard &
Poor's Ratings Services today assigned its 'BBB-' rating to the
proposed issue of benchmark size U.S. dollar-denominated senior
unsecured notes due 2022 by India's largest power company, NTPC
The proposed issue is the third drawdown under the company's
US$2 billion medium-term notes program, which Standard & Poor's
has rated 'BBB-'. The rating on the proposed notes is subject to
our review of the final issuance documentation. NTPC plans to
use the proceeds from the proposed notes to fund its ongoing and
new capital expenditure in the power sector.
The rating on NTPC Ltd. reflects the company's dominant
market position, cost-competitive operations, strong cash flow
measures and liquidity, and a favorable regulatory environment.
NTPC's aggressive capital expenditure plans, the weak credit
quality of its customers, the country and macroeconomic risk
associated with India (BBB-/Negative/A-3), and fuel supply risks
offset these strengths.
Our assessment of NTPC's stand-alone credit profile is
'bbb'. The issuer rating is lower than the stand-alone credit
profile to reflect our expectation of a potential negative
intervention from the Indian government if the sovereign comes
under significant fiscal or external stress.
The rating on NTPC also reflects our opinion of a "very
high" likelihood of extraordinary government support in the
event of financial distress. We believe that the company has a
"very strong" link with the government, which owns 84.5% of it,
with administrative control by the Ministry of Power. We expect
the government to retain its majority shareholding in the
company. NTPC's "very important" role for the government
reflects the company's public policy role of increasing India's
power generation capacity and its dominant position in a power
The negative outlook on NTPC is consistent with that on the
sovereign rating on India and reflects the company's sensitivity
to government intervention.
We could lower the rating on NTPC if: (1) we lower the
sovereign credit rating; (2) ongoing support from the government
declines; (3) the company incurs large debt-funded capital
expenditure and a weakening in cash flows such that its ratio of
adjusted funds from operations to debt falls to 10% on a
sustainable basis; or (4) the company's stand-alone credit
profile deteriorates substantially, which we consider unlikely
in the next 12-18 months.
We could revise the outlook to stable if we revise the
sovereign rating outlook to stable.
RELATED CRITERIA AND RESEARCH
-- NTPC Ltd. May 15, 2012
-- Rating Government-Related Entities: Methodology And
Assumptions, Dec. 9, 2010
-- 2008 Corporate Criteria: Analytical Methodology, April