Comments
Shares of Tata Power fell one per cent to Rs 87.50 in early trade on Tuesday on the BSE after Moody's Investors Service downgraded the outlook on the company to negative from stable.
The negative outlook reflects renewed uncertainties related to the material covenant breaches on bank debt associated with Tata Power Company's Gujarat-based Mundra Ultra Mega Power Project which is being executed under its fully-owned subsidiary, Coastal Gujarat Power, said Ray Tay, a Moody's Associate Vice-President and Analyst.
Although Coastal Gujarat Power has secured waivers from the banking group for the covenant breaches, they expired on June 30, 2013, bringing the liquidity risk associated with the project back to the fore, added Tay, also the Lead Analyst for TPC.
In addition, the negative outlook reflects continued delay in the resolution of Coastal Gujarat Power's tariffs, which are ultimately expected to be approved, but absent timely approval will exert pressure on CGPL's finances, while the low coal prices and stoppage of work at one of TPC's co-owned mines adds uncertainty over the extent to which its coal investments will be able to offset the losses, the statement said.
TPC's previous stable rating outlook was based on Moody's expectation that CGPL will obtain the necessary waivers on terms that will not be severely detrimental to the Mundra project or to TPC.
Tariffs under CGPL's Power Purchase Agreements combine both fixed and variable elements, including fuel costs, and CGPL can pass through only 45 per cent of its fuel costs to its customers.
Although CGPL's foreign currency debt is hedged till 2015 and thus insulated from the recent adverse movements in forex rates if the Indian rupee continues to be weak against the dollar, debt servicing beyond 2015 would be affected, Moody's said.
Tata Power Company is one of India's leading private-sector power companies, with an installed capacity of 8,521MW, mainly coal-fired. It has interests in hydro, thermal, wind and solar power generation, and in power transmission and distribution. TPC satisfies 80 per cent of the electricity needs of Mumbai, India's largest city by population.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.