Global rating agency Standard & Poor's has upgraded the credit outlook for Tata Power to "positive" citing favourable regulatory developments.
In a relief to the utility, electricity regulator CERC last month allowed higher tariff as well as compensation of Rs 329.45 crore for Tata Power's 4,000 MW Mundra project to compensate for increase in the price of imported coal.
"We revised the outlook on the long-term rating to reflect the favourable regulatory developments and Tata Power's debt reduction measures to help improve its liquidity and cash flows over the next 12 months," Standard & Poor's credit analyst Rajiv Vishwanathan said today.
The outlook has been revised to positive from negative.
According to him, the outlook also reflects the rating agency's expectation that the company would be able to address "the loan covenant breach at its Mundra project over the next 12 months, given the favourable regulatory decision".
S&P has also affirmed Tata Power's 'B+' long term corporate credit rating on the company and the 'B+' issue rating on its senior unsecured notes.
"We believe Tata Power's current cash balances and proceeds from its recent Rs 20 billion rights issue should enable it to meet its debt maturities totalling about Rs 33 billion (Rs 3,300 crore) over the next 12 months," S&P said in a statement.
Besides in January, the company had announced the sale of its 30 percent stake in PT Arutmin (a coal mine in Indonesia) for about USD 500 million.
While there is a possibility of appeals from buyers of power over the tariff order, "we expect this to be resolved quickly given the extended process and discussion between the regulator and affected parties prior to issuing the order," Vishwanathan said.
However, S&P cautioned that the outlook could be revised if the tariff increase at CGPL is materially delayed because of appeals against the regulator's order, among other factors.
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