Moody?s Investors Service has downgraded the corporate family rating of Tata Power Company Ltd to B1 from Ba3.
At the same time, Moody?s has downgraded the company?s senior unsecured bond rating to B2 from B1 and the foreign currency rating for its senior unsecured MTN programme to (P)B2 from (P)B1. The outlook for the ratings is stable. The actions conclude the review for downgrade initiated by Moody?s in June, it said in a media release.
In June, Moody?s had said it was reviewing the corporate rating of Tata Power for possible downgrade, primarily due to bank debt related to the company?s Mundra ultra mega power project in Gujarat.
It had also said then that rating action reflected material covenant breaches on bank debt associated with 4,000 MW Mundra UMPP and questions relating to the project?s long-term impact on its financial profile, absence of changes to tariff structures.
?The downgrades reflect the deterioration in TPC?s credit quality as a result of the impact of weak coal prices on its Indonesian coal mines, as well as the continuing uncertainty related to unresolved bank waivers and the tariff renegotiations for its Mundra UMPP,? Ray Tay, a Moody?s assistant vice-president and analyst, said on Friday.
The Mundra project is executed through TPC?s fully-owned subsidiary, Coastal Gujarat Power Limited (CGPL).
?While the investment in coal mines initially offered a possible hedge against TPC?s fuel costs, the recent weakness in coal prices has diminished this benefit, thereby eroding the cash contributions to TPC. We also expect margins at the mines to remain depressed,? Tay added.
?Moody?s continues to view CGPL?s unresolved bank waivers as a weakness. However, given the nature of the banking consortium and TPC?s financial support for the project, a default is very unlikely,? the release said.
The outlook is stable based on Moody?s expectation that the waiver will be obtained in the next few months on terms that will not be severely detrimental to the Mundra project or TPC overall, it added.
Tata Power scrip was marginally down on the BSE on Friday to close at R104.05.