Global rating agency Standard & Poor’s (S&P) lowered corporate credit rating on Tata Power to ‘BB-‘ indicating non-investment grade from ‘BB+’ with stable outlook.
The weakening financial profile is accompanied by some erosion in the company’s business profile, as recent investments are in more competitive environments where the company would potentially face higher counterparty risks and a reduction in the proportional contribution of its relatively protected licensed operations, S&P said in a release.
The rating is removed from CreditWatch, where it was placed on May 9, 2007, with negative implications, after the company’s acquisition of Coastal Gujarat Power, a special purpose entity formed for financing and executing the Rs 17,000 crore, 4,000 MW Mundra power project.
The company subsequently announced the finalisation of agreements to acquire 30 per cent equity in two Indonesian coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia, for about USD 1.1 billion.
“S&P considers that these outlays, in addition to the company’s ongoing expansion plans, would radically increase the company’s consolidated debt, in comparison with its existing operating cash flows, and result in a material weakening of its credit protection parameters,” said Standard & Poor’s credit analyst Anshukant Taneja.