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Discom Ratings by ICRA and CARE for Ministry of Power

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Ratings of various Distribution Utilities across the country

Text of Discom Ratings by ICRA and CARE for Ministry of Power

Ministry of PowerGovernment of India

State Distribution UtilitiesFirst Annual Integrated Rating

MARCH, 2013

Shram Shakti Bhawan, New Delhi-110 001 Phone : 91-11-23717474, 23710411, Fax : 91-11-23710065

First Integrated Rating for State Power Distribution Utilities

Section I Background, Utilities Covered and Scoring Methodology

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First Integrated Rating for State Power Distribution Utilities

BACKGROUNDThe Integrated Rating methodology for State Power Distribution Utilities was developed by Ministry of Power (MoP) and unveiled in the State Power Ministers conference held in July 2012 (Appendix). The methodology was developed by MoP keeping in view poor financial health of State Distribution utilities and the need to base future funding exposures on an objective rating mechanism. The main objectives of developing the integrated rating methodology for the state distribution utilities are: To devise a mechanism for incentivising/dis-incentivising the entities in order to improve their operational & financial performance. To facilitate realistic assessment by Banks/FIs of the risks associated with lending exposures to various distribution utilities and enable funding with appropriate loan covenants for bringing improvement in operational, financial and managerial performance. May serve as a basis for Govt. assistance to the state power sector through various schemes like RAPDRP, NEF, etc.

MoP has mandated Power Finance Corporation (PFC) to co-ordinate the rating exercise, which in turn has appointed ICRA & CARE to carry out the rating exercise. The exercise does not cover State Power/Energy Departments and private sector distribution utilities.

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First Integrated Rating for State Power Distribution Utilities

UTILITIES COVERED BY ICRA & CARES.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Names of Distribution Utilities Utilities graded by ICRA Dakshin Gujarat Vij Company Limited Uttar Gujarat Vij Company Limited Madhya Gujarat Vij Company Limited Paschim Gujarat Vij Company Limited West Bengal State Electricity Distribution Company Limited Maharashtra State Electricity Distribution Company Limited Bangalore Electricity Supply Company Limited Mangalore Electricity Supply Company Limited Hubli Electricity Supply Company Limited Gulbarga Electricity Supply Company Limited Punjab State Power Corporation Limited Assam Power Distribution Company Limited Chamundeshwari Electricity Supply Corporation Limited Bihar State Power Holding Company Limited Tamil Nadu Generation & Transmission Corporation Limited Purvanchal Vidyut Vitran Nigam Limited Paschimanchal Vidyut Vitran Nigam Limited Kanpur Electricity Supply Company Limited Dakshinanchal Vidyut Vitran Nigam Limited Madhyanchal Vidyut Vitran Nigam Limited Utilities graded by CARE Southern Power Distribution Company of Andhra Pradesh Limited Eastern Power Distribution Company of Andhra Pradesh Limited Kerala State Electricity Board Central Power Distribution Company of Andhra Pradesh Limited Himachal Pradesh State Electricity Board Limited Northern Power Distribution Company of Andhra Pradesh Limited Chhattisgarh State Power Distribution Company Limited Uttar Haryana Bijli Vitran Nigam Limited Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited Dakshin Haryana Bijli Vitran Nigam Limited Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited Tripura State Electricity Corporation Limited Uttarakhand Power Corporation Limited Jaipur Vidyut Vitran Nigam Limited Meghalaya Energy Corporation Limited Ajmer Vidyut Vitran Nigam Limited Jodhpur Vidyut Vitran Nigam Limited Jharkhand State Electricity Board

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First Integrated Rating for State Power Distribution Utilities

RATING APPROACH / INPUTS

The broad parameters that have been used for the rating are as follows:Sr. No. 1 2 3 4 5 6 7 Financial Performance Audited Accounts Cross Subsidy Reform Measures - Unbundling & Corporatisation Regulatory Environment Forward looking parameters Incentive / Bonus marks Total score Parameters Weightage 63 5,-12 0,-2 0,-5 15,-15 5,-1 12 100

Scores have been assigned both on the basis of absolute & relative improvement in operational and financial performance parameters. Financial performance parameters like subsidy received, cost coverage ratio, AT&C losses, financial planning, etc carry the maximum weightage of about 60%.Efficient Regulatory practices is the second most important factor holding weightage of 15%. These include Issue of regulatory guidelines, Issue of tariff guidelines, Timely filing of tariff petition; & Timely issue of tariff order. Other parameters relating to submission of audited accounts, metering, IT & computerisation, no default to Banks/FIs, Renewable energy purchase obligations compliance, etc account of around 25%. Certain parameters carry negative scores on non compliance like Non auditing of accounts (upto minus 12%), SEBs unbundling (upto minus 5%), Non filing of tariff petition (upto minus 5%), Deterioration of AT&C loss (upto minus 5%), Untreated revenue gap (upto minus 5%), Increase in payables, presence of regulatory assets, negative net worth (each upto minus 3%). The rating has been based primarily on data submitted by the SEBs / State distribution utilities in response to questionnaires sent by the rating agencies. Other sources of data accessed include Audited Accounts, Annual Administrative Reports, assessment of Financial Resources for Annual Plan submitted to the Planning Commission and Tariff Orders issued by the SERCs. The data collected, as above, has been supplemented with meetings with key officials of the SEBs / State distribution utilities.

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Section II Grading Scale & Utility-wise Grades

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First Integrated Rating for State Power Distribution Utilities GRADING SCALE AND GRADES

Score Distribution Between 80 and 100 Between 65 and 80 Between 50 and 65 Between 35 and 50 Between 20 and 35 Between 0 and 20

Grade A+ A B+ B C+ C

No. of Utilities 4 2 11 10 8 4

Grading Definition Very High Operational and Financial Performance Capability High Operational and Financial Performance Capability Moderate Operational and Financial Performance Capability Below Average Operational and Financial Performance Capability Low Operational and Financial Performance Capability Very Low Operational and Financial Performance Capability

The proposed grading scale of A+ to C is different from the prevalent rating scale adopted by CRAs (AAA to D) as the prevalent rating measures the degree of safety regarding timely servicing of financial obligations based on probability of default; however, current grading exercise analyzes the operational and financial health of the distribution entities based on the rating framework approved by Ministry of Power. Further, credit rating for distribution utilities entails comparison with other corporates, as compared to the integrated rating exercise wherein comparison of the entity is done with other distribution utilities only.

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First Integrated Rating for State Power Distribution Utilities UTILITY-WISE GRADES

S.No.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

Name of UtilityDakshin Gujarat Vij Company Limited Uttar Gujarat Vij Company Limited Madhya Gujarat Vij Company Limited Paschim Gujarat Vij Company Limited West Bengal State Electricity Distribution Co. Ltd. Maharashtra State Electricity Distribution Co. Ltd. Bangalore Electricity Supply Company Limited Mangalore Electricity Supply Company Limited Southern Power Distribution Company of AP Limited Eastern Power Distribution Company of AP Limited Hubli Electricity Supply Company Limited Kerala State Electricity Board Central Power Distribution Company of AP Limited Himachal Pradesh State Electricity Board Limited Gulbarga Electricity Supply Company Limited Chhattisgarh State Power Distribution Company Ltd. Punjab State Power Corporation Limited Northern Power Distribution Company of AP Limited Assam Power Distribution Company Limited Chamundeshwari Electricity Supply Corporation Ltd. Uttar Haryana Bijli Vitran Nigam Limited Tamil Nadu Generation and Distribution Corporation Ltd. Dakshin Haryana Bijli Vitran Nigam Limited MP Pashchim Kshetra Vidyut Vitaran Company Ltd. MP Poorv Kshetra Vidyut Vitaran Company Limited Bihar State Power Holding Company Limited MP Madhya Kshetra Vidyut Vitran Company Limited Tripura State Electricity Corporation Limited Uttarakhand Power Corporation Limited Jaipur Vidyut Vitran Nigam Limited Jodhpur Vidyut Vitran Nigam Limited Ajmer Vidyut Vitran Nigam Limited Meghalaya Energy Corporation Limited Jharkhand State Electricity Board Purvanchal Vidyut Vitaran Nigam Limited Paschimanchal Vidyut Vitaran Nigam Limited Dakshinanchal Vidyut Vitran Nigam Limited Kanpur Electricity Supply Company Limited Madhyanchal Vidyut Vitran Nigam Limited

Rating AgencyICRA ICRA ICRA ICRA ICRA ICRA ICRA ICRA CARE CARE ICRA CARE CARE CARE ICRA CARE ICRA CARE ICRA ICRA CARE ICRA CARE CARE CARE ICRA CARE CARE CARE CARE CARE CARE CARE CARE ICRA ICRA ICRA ICRA ICRA

GradeA+ A+ A+ A+ A A B+ B+ B+ B+ B+ B+ B+ B+ B+ B+ B+ B B B B B B B B B B C+ C+ C+ C+ C+ C+ C+ C+ C C C C

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Section III Summary of State Power Distribution Utilities Ratings

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DAKSHI