Moody's assigns Baa3 to Adani Electricity Mumbai's dollar senior bond

Singapore, April 30 : Moody's Investors Service on Thursday assigned a definitive Baa3 senior secured rating to the 10-year one billion dollars senior secured bullet bonds issued by Adani Electricity Mumbai Ltd (AEML).
The outlook is stable. Servicing of the bonds will be supported by an obligor group that includes AEML and Power Distribution Services Ltd (PDSL). Both AEML and PDSL are 74.9 owned subsidiaries of Adani Transmission Ltd (ATL).
Proceeds from the bonds were used to partly fund the repayment of senior debt at AEML with the excess retained for general corporate purposes.
AEML owns and operates ATL's integrated utility business in Mumbai which is regulated by the Maharashtra Electricity Regulatory Commission (MERC). PDSL provides specialised network services as well as certain back-office services to AEML.
"The Baa3 rating of AEML's dollar bonds takes into account the mature and transparent regulatory framework under the MERC, underpinning predictable cash flows as well as the quality of AEML's diversified customer base in Mumbai and its solid operating track record," said Spencer Ng, Moody's Vice President and Senior Analyst.
The bond rating is constrained at the Baa3 level, however, by the company's high financial leverage after factoring in AEML's capital expenditure plans and its exposure to competition from other licensed distributors in its catchment areas.
Over the next two to three years, Moody's expects AEML's funds from operations to debt to remain in the low- to mid-9 per cent range compared to the minimum tolerance level of 9 per cent for its Baa3 rating.