'No sharp change in fortunes after elections for infra'

Negative on power and airports; roads stable in pocket: India Ratings

India Ratings today said that the outlook for the overall infrastructure sector remains negative. Within the sector, outlook for highway projects remain stable in pockets. Barring renewables, power sector continues to be negative. 

 

In spite of huge hopes that the sector has of a post-election surge in fortunes, the rating agencydoes not expect a sharp move. This is especially in the short-term, it said, adding that policy support could be of help. 

 

The benefits of measures taken by the government in the power sector will trickle-down only after 2015. Multiple issues like lack of fuel, coal price volatility, high interest costs and financial health of off-takers including depreciating Rupee, are affecting the credit profiles of coal-based power projects. 

 

Renewables are a silver lining in the otherwise dark situation of the power sector. “However, technological risk on account of limited track record and regulatory risk on possible reductions in tariff cannot be ruled out in the solar power space,” said India Ratings, in a press release.

 

The agency revised the outlook on the airport sector to stable for 2014-15 to negative from stable. This is due to Delayed monetisation of real estate assets and airlines’ continued weak financials, though in different degrees, could be a drag on projects’ cash flows. Though minor sea ports are likely to remain largely stable, non-major private ports, which are still in ramp-up stages, are on a stable to negative outlook.

   

“Prolonged uncertainty surrounding economic conditions, over-ambitious traffic estimates and enhanced construction risks have plagued the road sector for some time now. As the current situation is expected to continue the near term, it will be a drag on the project cash flows of toll road assets,” said the agency, in a press release.