ICRA reaffirms ratings for Tata Power NCD, commercial paper and short-term debt

17 Mar 2011


ICRA has reaffirmed LAA and A1+ ratings assigned for Tata Power's non-convertible debenture (NCD) programme of Rs2,600 crore and commercial paper / short-term debt programme of Rs500 crore, the company said today.

The long-term rating is based on a positive outlook for Tata Power, India's largest integrated private power utility, the rating agency said.

The reaffirmation of ratings takes into account the significant progress achieved in execution of the greenfield power projects at Mundra (4,000MW) in Gujarat and Maithon (1,050MW) in Jharkhand, the company said.

The rating agency has also taken cognisance of the stable cash flows generated from the company's operations in the licensee business and the overall favourable financial profile on a standalone basis characterised by healthy profitability levels and comfortable capital structure.
The ratings also factor in the continued satisfactory operational and financial performance of coal operating companies in Indonesia where Tata Power holds a 30-per-cent equity stake.

Sustained buoyancy in coal prices is expected to keep the liquidity of its coal SPVs comfortable for debt servicing of the acquisition debt on its books, it said.

Commenting on the high debt levels on a consolidated basis, ICRA said most of the debt is 'non-recourse' in nature and is on the books of the subsidiaries. Besides, the existing debt on Tata Power's books has long maturity.

The company's established track record across the value chain in the power sector provides comfort from the credit perspective, it added.

The ratings are, however, constrained by the continued but reduced execution risks, time and cost overruns, in the ongoing projects, the changing business risk profile of the company with increasingly larger share likely to accrue from the non-regulated businesses and the high debt levels on a consolidated basis, the rating agency said.

ICRA also noted that the company is considering large expansion plans on its own books, through the same are currently in nascent stages and hence, timing and funding plans for the same remain key sensitivities.

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