India Ratings and Research (Ind-Ra) has assigned NHPC's  Rs 1.71 billion bonds an 'IND AAA' rating with a stable outlook. The agency has also affirmed NHPC's long-term issuer rating at 'IND AAA' with a stable outlook.

NHPC has high revenue predictability as it operates its plants on the cost-plus regime which provides a post-tax return of equity (RoE) of 15.5%-16.5% along with a reasonable recovery of all costs. The upcoming plants are also likely to be under the same tariff regime, which reduces business risk.

NHPC's generation increased in FY15 to 22 billion kWh (bnkWh), post declining in FY14 to 18.4bnkWh. Ind-Ra expects the generation to be in the range of 22 billion kWh- 2.5 billion kWh in FY16.

NHPC's incentive income increased to Rs 4.8 billion in FY15 (FY14: Rs 3.3 billion), driven by the higher secondary energy incentives of Rs 1.4 billion (Rs 0.9 billion) as the generation exceeded design energy along with the revision in secondary energy rate to Rs 0.9/kWh (Rs 0.8/kWh) and higher unscheduled interchange income of Rs 1.6 billion (Rs 721 million).

Ind-Ra estimates NHPC could earn nearly 17% RoE (16.5% core RoE +0.5% from incentives) on its regulated equity annually. NHPC's regulated equity grew at a CAGR of 8.5% over FY10 to Rs 102 billion in FY15.

Ind-Ra expects NHPC to continue to have higher than normative availability in FY16. The company's average actual availability of 77.3% in FY15 (FY14: 77.7%) was higher than the average normative plant availability, leading to a capacity charge incentive of Rs 1.8 billion (Rs 1.7 billion).

Despite the addition of 807MW in FY14, the capacity incentive did not increase much as Dhauliganga, Parbati-III and TLDP-III could not achieve their normative plant availability factors.