Rating Rationale

Brickwork Ratings reaffirms BWR AAA for the Long term Bank
Facilities of 2500 Cr for Neyveli Lignite Corporation Limited (NLC)

Brickwork Ratings (BWR) reaffirms the Rating1 BWR AAA (BWR Triple A) with a Stable
Outlook for Long Term Bank Loan Facilities of Neyveli Lignite Corporation Limited (NLC
or the Company) for 2500 Cr.
Credit facilities with this rating are considered to have the highest degree of safety
regarding timely servicing of financial obligations and carry lowest credit risk.
The rating takes into consideration the Companys efficient operations and healthy financial
profile. Sufficient fuel supply on account of its captive lignite mines, cost-plus based tariff
mechanism applicable for its power generation plants, favourable demand outlook in view
of the power deficit scenario in the southern states and a healthy financial risk profile
characterised by favourable capital structure and strong liquidity. Further, the rating also
takes into account the dominant ownership of Government of India. However, the ratings
are constrained by delay in payment of dues by Tamil Nadu Generation and Distribution
Company (TANGEDCO) resulting in elongation of average collection period and time and
cost over-run in the execution of its expansion projects.
The ability of the company to execute its projects timely and within the cost envisaged
together with improvement in average collection period remains the key rating sensitivities.
Business and Operation:
NLC currently operates six lignite mines with an aggregate capacity of 30.6 million tonnes
per annum (mtpa). The Company has limited fuel supply risk since the company sources its
entire raw material requirement from its captive mines. All the mines, except Mine I A, are
linked to NLCs thermal power stations. Mine I A supplies lignite to ST-CMS Electric Co Pvt
Ltd, an Independent Power Producer (IPP) located in Neyveli that sells power to
TANGEDCO. Two of the mines, Barsingsar Mine and Mine II Expansion, were
commissioned in 2009-10 and have achieved their rated production capacity; however,
lignite extraction has been low from the mines since one of the linked thermal power
stations (TPS) namely Barsingsar TPS was commissioned only in January 2012 and the
other TPS II Expansion is still under execution.

Please refer to www.brickworkratings.com for definition of the Ratings

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3 Apr 2014

Mine Name

Total Reserves
(MT)

Production
(MTPA)

Status

Mine 1

365

10.5

Operational

Mine 1 A

120

Operational

Mine II

390

10.5

Operational

Mine II Expansion

250

4.5

Operational

Barsingar (Raj.)

53

2.1

Operational

Total

1,178

30.60

NLC operates four lignite fired thermal power generating stations with an installed capacity
of 2,740 MW. The most recent unit, the Barsingsar TPS with an installed capacity of 250
TPS, was commissioned in late 2011-12.
NLC is currently executing three thermal projects:
a) TPS II Expansion project expected to be commissioned during the current financial year
b) Coal-based thermal station at Tuticorin through a joint-venture with TNEB with partial
fuel linkages with Mahanadi Coal Fields and expected to be operational by end of 2013-14
c) New Neyveli Thermal Power Station (NNTPS) project, a 1,000 MW lignite based station
to replace the existing TPS I, that received GoI sanction in June 2011. The said project is
currently in the initial stages and is expected to be operational by 2016-17. The details of the
companys power stations are provided below.
Power Plant Station

Location

Installed capacity
(MW)

Status

Thermal Power Station

(TPS) I

Neyveli

600

Operational

TPS-I Expansion

Neyveli

420

Operational

TPS-II

Neyveli

1470

Operational

Barsingar TPS

Barsingar

250

Operational

TPS-II Expansion

Neyveli

500

Project completion stage

Coal based Power Station

Tuticorin

1000

Under Construction

New Neyveli TPS

Neyveli

1000

Under process of
tendering

www.brickworkratings.com

3 Apr 2014

Segment-Wise Performance:
Mines The aggregate installed Capacity of all lignite mines stands at 30.6 MTPA as on 31st
march 2013. The aggregate OB removal and lignite production during the year under review
were 1674.85 Lm3 and 262.23 LT, respectively compared to 1651.47LM and 245.90 LT
achieved during the year 2011-12.
Power -The Present installed capacity of the thermal Power plant of NLC is 2740 MW . The
aggregate power generation during the year under review was 19902.34 MU as Compared to
18789.44 MU generated in FY12. The detail Plant Wise Performance is mentioned below:

TPS-I (600 MW)

TPS-I Expansion
(420 MW)
TPS-II (1470
MW)
Barsingsar TPS
(250 MW)*

Power
Generation
(MU)
FY12
3987.85

FY13
4035.43

Power
Exported
(MU)
FY12
3171.82

FY13
3215.98

FY12
75.67%

FY13
76.77%

3042.68

3319.77

2809.97

3035.58

82.47%

90.23%

11087.65

11238.09

9278.76

9455.81

85.87%

87.27%

617.68

1280.85

510.79

1114.33

PLF %

Financial performance:
Brickwork Rings notes the delays in NLCs ongoing projects, particularly TPS II Expansion
and Tuticorin project, which has resulted in cost overruns. Approval of the revised project
costs by the regulator would remain critical for the company so as to earn the normative
returns on the full capital costs incurred. Further, the companys Barsingsar project is
operating at lower than normative availability level due to stabilisation issues, thereby
resulting in under-recovery of fixed costs; the company is expecting a resolution on this
matter in the near term. BWR however takes comfort from the healthy cash accruals from
the companys other operating power plants and the cash balances of Rs 4,413 crore available
as on August 2013, which provides it with enough cushion to absorb such under-recoveries
for the near term.

NLC reported a profit after Tax (PAT) of Rs.1457.76 Crore on a total income of Rs. 5590.07
Crore in FY 13 as compared to PAT of Rs. 1411.33 Crore on the income of Rs. 4866.85 Crore
in FY12.The Companys capital structure has remained comfortable in the range of 0.42x to
0.52x as at end of last three years. Further, the debt protection metrics measured in terms of
interest service coverage ratio and net cash accruals to total debt ratio are also comfortable.

www.brickworkratings.com

3 Apr 2014

Outlook
NLC is maintaining healthy operational performance given its efficient operations, low
demand risk, cost-plus tariff structure and healthy financial risk profile. Going forward, the
funding mix and timelines for implementation of its on-going projects together with timely
collection of receivables are the key rating sensitivities.
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Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied
warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned
by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable
for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at
any time for any reasons.

www.brickworkratings.com

3 Apr 2014