Sep 07, 2013, 06.17 PM | Source: PTI
The long-term corporate credit rating of Tata Power has been cut to 'B+' from 'BB-' with a negative outlook. A 'B+' rating indicates relatively higher credit risk.
The long-term corporate credit rating of Tata Power has been cut to 'B+' from 'BB-' with a negative outlook, according to Standard & Poor's Ratings Services. A 'B+' rating indicates relatively higher credit risk. "We lowered the rating on Tata Power because we believe the company's cash flows are likely to remain weak with a ratio of funds from operations (FFO) to adjusted debt at les than 10 percent over the next 12 months," Standard & Poor's credit analyst Rajiv Vishwanathan said in a statement.
The main reasons cited for lower cash flows, on a consolidated basis, are less-than-full recovery of fuel costs at the 4,000 MW Mundra project and lower returns from investments in Indonesian coal companies. "The fully operational Mundra project exposes Tata Power to volatility in coal prices because the company can only pass through a part of fuel costs to its customers. The project's ability to blend fuel with some low calorific value coal tempers the fuel-price risk," the agency said.
The issue rating on the company's outstanding senior unsecured notes due 2017 has been lowered to 'B+' from 'BB-'. S&P said the Central Electricity Regulatory Commission's order for a full pass-through of fuel costs at the Mundra project is likely to improve Tata Power's cash flows. "However, the timing and quantum of the tariff remain uncertain. We expect Tata Power's ratio of FFO to debt to be about 7.5 percent in fiscal 2014 and rise to 10-14 percent
in fiscal 2015 if the compensatory tariff becomes effective in 2015," it added.
According to S&P, lenders to the Mundra project are likely to support the project even after the expiry of a waiver on a bank loan covenant breach in June 2013. Tata Power's weak consolidated cash flows may hamper its ability to pay maturing debt over the next 18 months. "Tata Power has large bullet debt maturities totalling about USD 670 million due in April 2014, July 2014, November 2014 and April 2015," it added.
S&P said it may lower the rating if Tata Power's liquidity weakens further or if the company faces difficulty in refinancing its debt maturities in a timely manner.
Tata Power stock price
On February 12, 2016, Tata Power Company closed at Rs 56.55, up Rs 0.25, or 0.44 percent. The 52-week high of the share was Rs 89.65 and the 52-week low was Rs 55.00.
The company's trailing 12-month (TTM) EPS was at Rs 3.45 per share as per the quarter ended December 2015. The stock's price-to-earnings (P/E) ratio was 16.39. The latest book value of the company is Rs 58.15 per share. At current value, the price-to-book value of the company is 0.97.
Tata Power to develop environment-friendly Padmount substation
Tata Power today said that it has partnered with T
Power tariff for those consuming over 300 units may rise in Maha
Maharashtra Energy Minister Chandrashekhar Bawanku
Tata Power commissions 450 MW hydro power capacity in 100th yr
"The company, having successfully served the natio
Expect Arutmin mine sale to be completed in 6 months: Tata Power
The company is getting closer to the Arutmin mine
Buy Tata Power; target of Rs 67: ICICIDirect
Tata Power generates 35 billion units so far in FY16
The company also reported increase in generation,
Artech Power Products: Outcome of board meeting
Artech Power Products in its Meeting held on Febru
GVK Power Q3 net loss widens to Rs 279 crore
The company's net loss in the corresponding quarte