Fitch Ratings has said its outlook for the Indian infrastructure sector, encompassing energy, transportation and urban infrastructure, is stable for 2011.
However, Mr William Streeter, Managing Director, Global Infrastructure and Project Finance, Singapore, said, “The key project risks to watch in 2011 with respect to infrastructure debt ratings are execution capacity, the propensity for construction risk, over-dependence on project sponsors for risk mitigation and financing constraints.”
Fitch said many of India's toll road projects are still under construction and face lingering right-of-way problems. In some cases, Fitch expects sponsors to continue extending support through ad-hoc equity injections to maintain credit quality. Other toll roads which are in the early stages of traffic and revenue ramp-up could face financial stress, given the broad industry trend of underperformance in relation to original traffic projections.
Power projects which have the necessary physical and financial requirements in place should be able to register construction progress and retain stable credit profiles, especially where their sponsors have broad experience within the sector. Nevertheless, the unprecedented pace of the construction of new thermal power plants is placing stress on construction schedules and also on the value chain for skilled manpower, equipment and fuel supplies.
The generally low ratings profile not only incorporates numerous and varied risks, especially for the majority of under construction projects, but also accounts for stable rating outlooks. The country's positive economic performance and latent demand for key infrastructure assets are significant contributors to the outlook,” said Mr S. Nandakumar, Senior Director in Fitch's Global Infrastructure and Project Finance in India.
Airports have benefited from a continued uptick in passenger numbers throughout 2010, coupled with the slightly improved financial health of many airlines. This is likely to continue in 2011.