(The following statement was released by the ratings agency)
May 20 - Fitch Ratings has affirmed India-based Ideal Energy Projects Limited’s (IEPL) INR11,070m project bank loans at ‘BB+(ind)’. The Outlook is Stable.
The affirmation reflects the substantial progress achieved by IEPL (60%) in the construction of its INR14,770m 270 megawatts (MW) coal-based thermal power plant in Nagpur, in line with Fitch’s expectations; Although there have been some delays. Fitch draws comfort from IEPL’s contingency plans to achieve the scheduled commercial operations date; however, some delays cannot be entirely ruled out. The project company has contracts with Bharat Heavy Electricals Ltd (BHEL.NS) (BHEL, ‘AAA(ind)’/Stable) for a boiler-turbine-generator and with McNally Bharat Engineering Company Ltd. (MCNL.NS) for the balance of plant equipment and civil work on an engineering, procurement and construction (EPC) basis. The completed contract negotiations, coupled with the appointment of experienced technical advisors and personnel, should partly offset the sponsor’s lack of an operating track record in the power sector. That said, given BHEL’s overflowing order book position, a price variation (with a cap of 20%) clause in the EPC contracts and a meager contingency provision (below 3%), the timely completion of the project without cost overruns remains a challenge.