"NHPC's ratings benefit from its position as the largest hydropower producer in India with about 15 per cent of the country's hydropower capacity," Fitch rating said in a press release.
According to statement NHPC does not have any offtake risks as it has long-term power purchase agreements for all of its power plants.
The company also has nine hydropower projects that are waiting for environmental and forest approvals - five standalone projects with total capacity of 4,995MW and four plants under joint-ventures/subsidiary with total capacity of 2,186MW.
NHPC is also pursuing solar, wind and thermal-based power projects. Given the high level of future capex, Fitch expects the company to post negative free cash flows.
Fitch said that NHPC's FY14 and (April December) 9MFY15 profitability was reduced mainly because of the expensing of costs related to these stalled projects.
Fitch expects the company's cash generation to improve once the Subansiri project becomes operational. However, the long delay in the completion of Subansiri continues to be a concern as the earnings from the project will also be delayed.
It said that NHPC suffers from poor receivables as more than half of its capacity is allocated to the unprofitable state-owned distribution companies.
"Most of NHPC's plants are in the north and north-eastern states, so the allocation of power is mostly to these states. At end-December 2015, the receivables increased to Rs 33.5bn from Rs 24.6 billion at end-March 2015, largely due to the rise in dues from Jammu and Kashmir (J&K), which accounts for around half of the total receivables," it said.
The company is, however, making progress in recovering its dues. NHPC's receivables are secured through letters of credit and a tripartite agreement (due to expire in October 2016) between the central government, central bank and states, it added.
NHPC's standalone credit profile is assessed at 'BBB-', it said.
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