SC order credit negative for Tata Power rating: Moody's

The Supreme Court's order regarding compensatory tariff for Tata Power in view of higher coal prices is credit negative, but does not impact its Ba3 rating, Moody's said on Wednesday.

"The Supreme Court's decision is credit negative, but does not impact TPC's Ba3 rating," said Moody's Investors Service in a release on Wednesday.

On Tuesday, the Supreme Court set aside the earlier order of the Appellate Tribunal for Electricity (ATE) which allowed relief to Tata Power Company's 100 per cent-owned subsidiary, Coastal Gujarat Power (CGPL, unrated), under the force majeure clause as per the power purchase agreement (PPA).

CGPL accounts for 38 per cent of TPC's total installed generation capacity of 10,477 mw as of March 2017.

Its 4 gw Mundra ultra mega power plant (UMPP) relies mainly on imported coal, mostly sourced from Indonesia.

The project's profitability has been impacted by the Indonesian government's decision in September 2011 to make coal available at market rates.

In the judgment, the apex court has clarified that changes in the cost of fuel or the agreement becoming onerous to perform are not treated as force majeure events under the PPA.

The court has directed Central Electricity Regulatory Commission (CERC) to hear the matter afresh and determine the amount of relief which should be granted to power generators who have been impacted by "domestic change in law" as per clause 13 of the PPA.

In 2015-16, CGPL reported an Ebitda of Rs 11.6 billion, up 31 per cent from last year.