Icra Scales Down Rs 2,015 Crore Mseb Bond

Credit rating agency Icra has downgraded the bonds issued by the Maharashtra State Electricity Board (MSEB) as a fallout of the Dabhol controversy.

Icra has downgraded the rating assigned to MSEB's bond programme of Rs 2,015 crore to LA+ (SO) from LAA- (SO).The rating has also been placed under watch.

"The revised rating indicates adequate safety and is based on the unconditional and irrevocable guarantee by the Government of Maharashtra " Icra has said in a press release.

The rating reflects the continued uncertainty on the timing and likely manner of settlement of MSEB'S payment dispute with the Dabhol Power Company and its impact on the financial position of MSEB and the Maharashtra government, Icra further explained.

 

The widespread impression in power industry circles is that if the payments dispute is settled at International Court of Arbitration in London.

DPC will be able to collect about Rs 20,000 crore in damages. This would not only affect the financial health of MSEB but also that of the beleaguered state government as it has stood guarantee for the payments.

MSEB is not unduly worried by the rating watch. A Krishnarav, the accounts member of MSEB told Business Standard, "MSEB has never defaulted on its debt servicing obligations and is fully confident of meeting future commitments. We continue to accord the highest priority to debt servicing."

The downgrade comes at a time when MSEB and the Enron- promoted DPC are locked in a fierce payments wrangle. MSEB has repudiated the power purchase agreement with DPC and refused to honour its bills.

This in turn has led to a legal dispute whose outcome is impossible to predict right now.

MSEB wants the dispute to be settled by the state power regulator, Maharashtra Electricity Regulatory Commission while the DPC's stand is that the issue should be settled by the International Court of Arbitration in London. The issue of jurisdiction is now before the Mumbai High Court.