Revises outlook to ‘stable’ from positive
Mumbai: Standard and Poor’s (S&P) Rating Services reaffirmed its ‘BB-‘ long-term corporate credit rating on Tata Power and ‘BB-’ issue rating on the company’s senior unsecured notes.
S&P’s rating on Tata Power continues to reflect the positive demand outlook for electricity in India, Tata Power’s good operating efficiency and the competitive position of the company’s core licensed operations. In S&P’s opinion these positives are tempered by the company’s aggressive financial risk profile, increasing exposure to competitive generation projects and residual completion risk at the Mundra project.
S&P revised the outlook for Tata Power to stable from positive due to rising fuel costs at the company’s Mundra project following a change in coal-export regulations in Indonesia. In S&P’s view this has reduced the upside for higher dividends to Tata Power on a consolidated basis. As a result, Tata Power's cash flow and financial risk profile are unlikely to improve as much as S&P had expected. The stable outlook reflects the predictability in Tata Power’s operating cash flow due to its licensed businesses, stable operation and capacity that will come on stream in 12-18 months.