OREANDA-NEWS. Adani Transmission Limited's (ATL, BBB-/Stable) rating will not be affected by its planned acquisition of three transmission assets from Reliance Infrastructure, Fitch Ratings says. The agency expects ATL's financial profile to remain in line with its expectations in the medium term, although the headroom will be limited.

ATL announced on 5 October 2016 that it will acquire three operational transmission assets from RInfra. The projects are:

1) two assets under Western Region System Strengthening Scheme - II in Maharashtra and Gujarat states, which RInfra secured through tariff-based international competitive bidding, and

2) Parbati Koldam Transmission Lines in Himachal Pradesh, which were developed via a 74:26 joint venture between RInfra and Power Grid Corporation of India Ltd (PGCIL, BBB-/Stable) under a cost-plus tariff model.

The three assets being acquired are regulated by the Central Electricity Regulatory Commission and benefit from a payment security mechanism. Under the mechanism, tariffs are collected by the central transmission utility and are distributed in proportion to annual revenue requirement of each transmission licensee, which minimises bilateral counterparty risk. ATL remains exposed to the financially weak power utilities that are owned by Maharashtra state; these utilities currently account for around 60% of ATL's transmission asset-related revenues. However, the latest acquisition and the commissioning of new projects will over time reduce ATL's exposure to Maharashtra state-owned power utilities.

Fitch estimates that EBITDA contribution from the assets will be sufficient to keep ATL's financial leverage, as measured by gross debt to EBITDA, at less than 5x in the medium term.

ATL expects to complete the transaction by 2Q17, subject to the necessary statutory and regulatory approvals. The obligor group for ATL's 4.0% USD500m senior secured notes due 2026 consists of ATL, the issuing entity, and two of its subsidiaries which own ATL's four operational transmission assets. ATL may include the acquired assets in the obligor group, subject to the terms of the notes.