Rationale

The rating continues to factor in the 100% ownership of Nuclear Power Corporation of India Limited (NPCIL/the company) by the Government of India (GoI) and its strategic importance to the GoI in the nuclear energy sector. The rating also considers the limited demand and tariff risks because of the long-term power purchase agreements (PPAs) with state distribution utilities for its entire capacity as per the tariff norms notified by the Department of Atomic Energy (DAE), the GoI. Moreover, the tariffs offered by the operational capacity are cost-competitive in relation to the average pooled procurement cost (APPC) of the offtaking distribution utilities. Further, ICRA takes note of the established track record of the operating capacity, with majority of the plants operating at higher-than-normative plant load factor (PLF), leading to stable cash flows. Lower-than-normative PLF was, however, observed in a few plants because of maintenance and rectification works. At present, two units of Tarapur Atomic Power Stations (TAPS – 1&2) are under prolonged shutdown and are expected to take at least another two-three years to restart operations, while unit 1 of Madras Atomic Power Station (MAPS) is also under prolonged shutdown since April 2018. While the combined capacity of these units is only 540 MW (8% of NPCIL's total capacity), their timely commencement remains important for the improvement in the company's overall generation. The rating also draws comfort from the strong financial profile of NPCIL, supported by healthy profitability, low gearing levels and comfortable debt coverage metrics. The funding of the ongoing projects is expected to be met through a mix of internal accruals, fresh equity and debt funding at highly competitive rates. These strengths are, however, partially offset by NPCIL's high counterparty credit risk due to the weak financial health of many of the offtaking state distribution utilities (discoms). This is evident from the high debtor days (140-150 days) as on December 31, 2021 due to significant payment delays from the state-owned utilities in a few states such as Tamil Nadu, Karnataka, Madhya Pradesh, Telangana and the Union Territory of Jammu & Kashmir. However, this risk is mitigated to some extent by the diverse offtaker profile and the GoI's directive to implement a payment security mechanism in the form of letters of credit. The debtors position improved to Rs. 4,711 crore as on March 31, 2021 from Rs. 5,527 crore as on March 31, 2020, with the receipt of payments under the GoI's liquidity infusion scheme (Atmanirbhar Bharat Abhiyan) in the form of loans from Power Finance Corporation (PFC)/Rural Electrification Corporation (REC) to the discoms. However, the debtor position again increased to Rs. 6,203 crore as on December 31, 2021 due to delays in payment by the state discoms, combined with higher billing in 9M FY2022 vis-à-vis the corresponding period of the previous fiscal.