Power Grid Corpn. rating upgraded

ICRA has upgraded the ratings assigned to the long-term bonds programme of Power Grid Corporation of India (PGCIL) to LAAA indicating highest safety. The upgradation takes into account PGCIL's status in the Indian power sector as a sovereign owned monopoly responsible for providing long distance high voltage transmission and National Grid management.

The rating also takes into consideration the weak financial position of the most of its customers namely State electricity boards (SEBs) proposal of securitisation of the receivables from the SEBs, initiation of reforms in States by setting up of State Electricity Regulatory Commissions (SERC's) and fixed transmission tariff structure. For a capital-intensive business like PGCIL's, its gearing is low which has resulted in comfortable coverage indicators.

Though the competitive bidding route may be adopted in future for evacuation of power from IPPs, PGCIL is expected to remain the monopoly transmission provider for central sector power generation projects. PGCIL's operations are characterised by low business risks because of the fixed transmission tariff structure.

The revised tariff structure was notified in December 1997. It allows for a 16 per cent return on equity up from 12 per cent earlier and considers actual debt/equity instead of a normative 1:1 earlier. Further the notification allows for an increase of one per cent for every percentage increase in grid availability above a normative 95 per cent. These changes have resulted in improved returns on capital for PGCIL.

Corporate Bureau

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Section  : Business
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