Tata Power seems to be in discussions with various lenders to avoid/postpone the penalties as it failed to fulfil the conditions of USD 2.3 billion loans taken for tis 4000 MW Mundra Ultra Mega Power Project (UMPP).
Tata Power has failed to meet the Debt to Equity Ratio and Debt Service Coverage Ratios (DSCR) due to inadequate tariff structure of Coastal Gujarat Power Limited (CGPL) the fully owned subsidiary of Tata Power holding the Mundra UMPP.
Though, the company had obtained waivers from the fines due to violation of the loan covenants of the previous fiscal end; the same has been expired on June 30, 2013.
Moody's Investor Service has changed the Tata Power's ratings outlook to negative considering the following:
- Continued delay in the resolution of CGPL's tariffs
- Low coal prices and stoppage of work at one of Tata Power's co-owned mines adds uncertainty over the extent to which its coal investments will be able to offset the losses.
- Uncertainty over expansion of waivers on fines by the lenders
- Adverse affects on the Debt Servicing post 2015 due to continued depreciation of Rupees (Till 2015, foreign currency debt is hedged)
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Additional Reading...
- http://www.livemint.com/Industry/H89kNd8DSE4VtnzskHq5PJ/Tata-Power-seeks-to-avoid-fines-on-23-billion-loans.html
- http://www.thehindubusinessline.com/markets/stock-markets/tata-power-slips-after-moodys-downgrade/article4872603.ece
- http://www.moodys.com/research/Moodys-changes-Tata-Powers-ratings-outlook-to-negative--PR_276623
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