The rating agency, ICRA, has revised the long-term rating outlook of the BGR Energy Ltd from ‘stable’ to ‘negative’. The agency is concerned over the award of fresh project orders, land acquisition issues and timely collection of ‘retention money’ from the project awarders.

The rating remains constrained by the significantly high working capital intensity in the business, execution risks in the on going projets and vulnerability of profitability to any unfavourable fluctuations in raw material prices for projects that are ‘fixed price’ in nature.

It also notes that because business from private sector independent power producers is drying up, the competition for state-owned projects has intensified.

BGR Energy has large equity commitments towards its boiler, turbine-generator manufacturing joint ventures. True, the company’s exposure is likely to be limited to the equity contribution. But the debt raised by the joint ventures would be ‘project recourse’ in nature, which means that BGR Energy would have to provide need based financial support to the JVs, especially in the initial years.

BGR Energy has emerged the lowest bidder in two tenders of NTPC for the supply of boilers and turbines, and is currently sitting on an order book worth INR 16,000 crore. ICRA said that “However, these projects remain exposed to possible delays in the receipt of the ‘notice to proceed', owing to issues such as delays in land acquisition, financial closure etc."

Chennai headquartered, INR 3,447 crore BGR Energy Systems Ltd is into two lines of businesses undertaking engineering, procurement and construction jobs for either ‘balance of plant’ part of a power project, or the entire power project, and the manufacture and supply of industrial products such as heat exchangers, pressure vessels and condensers.

Source - Business Line

(www.steelguru.com)