India’s largest integrated private power utility TATA Power said that rating agency ICRA Ltd has reaffirmed LAA and A1+ ratings assigned for the Tata Power’s Non-Convertible Debenture program of INR 2,600 crore and commercial paper/ short term debt program of INR 500 crore. The long term rating carries a positive outlook.

The reaffirmation of ratings by ICRA takes into account the significant progress achieved in execution of the Greenfield power projects at Mundra (4000 MW) in Gujarat and Maithon (1050 MW) in Jharkhand. The rating agency has also taken cognizance of the stable cash flows generated from the company’s operations in the licensee business and the overall favorable financial profile on a standalone basis characterized 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% 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.

While commenting on the high debt levels on a consolidated basis, ICRA said that 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 also said the ratings are however constrained by the continued but reduced execution risks, time and cost overruns, in the on going 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. ICRA also notes 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.