Adani Electricity Mumbai Secures Sovereign-Grade Rating After Years of Deleveraging
Adani Electricity Mumbai Ltd. (AEML), which supplies power to India’s bustling financial capital, has recently achieved a significant milestone by receiving a AAA credit rating from India Ratings. This upgrade signifies a remarkable turnaround for the utility, which was acquired from a financially troubled seller just eight years ago.
Factors Behind the AAA Credit Rating
India Ratings has attributed this prestigious rating to several key factors:
– Strong Regulatory Support: The Maharashtra Electricity Regulatory Commission has provided consistent tariff orders, enabling Adani Electricity Mumbai to recover accumulated regulatory assets along with associated carrying costs.
– Improving Financial Metrics: AEML has demonstrated robust growth in its financial metrics, benefiting from predictable cash flows and timely tariff adjustments.
– Sustained Deleveraging: The utility has effectively reduced its debt burden while maintaining elevated levels of capital expenditure, paving the way for long-term stability.
Leverage Reduction and Asset Expansion
Since its acquisition in 2018 by the Adani Group from the Anil Dhirubhai Ambani Group, AEML has experienced substantial growth:
– The utility’s asset base has surpassed Rs 10,000 crore, backed by continuous investment aimed at meeting Mumbai’s growing electricity demand.
– Leverage has consistently declined, with the regulated asset base projected to exceed Rs 100 billion by the end of fiscal 2026.
– Gross adjusted debt is expected to fall below one time the regulated asset base, thanks to strong internal cash generation and controlled capital spending.
Operational Improvements and Renewables Integration
Operational performance has also seen marked improvement:
– Distribution losses have decreased to 4.3% in the first half of fiscal 2026, with collection efficiency nearing 99%, aligning with global benchmarks.
– All long-term foreign currency borrowings are fully hedged, which minimizes exposure to currency fluctuations and refinancing risks.
Renewable Energy Commitment
AEML has significantly increased its reliance on renewable energy sources:
– Renewables now comprise approximately 40% of total power procurement, a substantial rise from less than 3% in 2019.
– The company aims to boost this figure to 60% by 2027, positioning Mumbai among cities with leading renewable integration in urban power supply.
– Most renewable power is anticipated to be sourced from Adani Green Energy Ltd., with thermal requirements supported by Adani Power Ltd., one of India’s lowest-cost coal-based generators.
Conclusion
The recent AAA credit rating reflects AEML’s impressive recovery and sustainability. With a solid regulatory framework, improved financial health, and a significant shift towards renewable energy, the utility is well-positioned for continued growth and stability. This transformation not only enhances its credit profile but also contributes positively to Mumbai’s electricity landscape.