Moody's cuts Tata Power rating to Ba3

Tata Power, the country's largest private sector power utility, had its rating downgraded by the rating agency Moody's. The company's corporate family rating has been downgraded to Ba3 from Ba1.

The agency also cut the power major's senior unsecured bond rating to B1 from Ba2 in view of higher risk profile of the company, which is building a 4,000-mw ultra mega power project at Mundra.

"Tata Power plans aggressive capital expenditure to increase its generation capacity from 2,323 mw to over 7,500 mw. This will raise the company's overall business and financial risk profile," according to Moody's.

According to analyst Jennifer Wong, by the end of 2008-09, consolidated debt of Tata Power is expected to more than double of what was at the end of 2006-07. Incidentally, this is the time when the bulk of capital expenditure for Mundra mega project is required.

"The result is the financial profile of Tata Power is going to be much weaker in the next three years," she was quoted as saying in a statement.

"The company will be exposed to increased counterparty risk as compared to its existing customer profile, which includes creditworthy clients in the Mumbai license area," added Wong.