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

Shares of Tata Power reversed early gains to fall as much as 6.78 percent, while Adani Power slumped up to 20 percent to its lowest since February 21.

Extending the previous day's sharp losses, shares of Adani Power and Tata Power today fell by up to 6 per cent after the Supreme Court ruled that the power discoms can not charge "compensatory tariff" on costlier import and set aside appellate tribunal's judgment in this regard. State power companies has challenged the decision in the Supreme Court. However, the decision allowing both the companies to charge higher tariffs from state utilities was contested and the Power procuring states went to Appellate Tribunal of Electricity (APTEL) contesting CERC's decision. With this new increased coal price, the viability of these power plants became hard with under-recoveries, as most of their feedstock came from Indonesia. Adani Power said in a statement Tuesday that the Supreme Court didn't grant relief for the increase in coal cost due to the change in the Indonesian regulation. Companies will now be more cautious when entering into long-term power purchase agreements, a Mumbai-based analyst told Reuters.

"The company is studying the final order".

It, however, said preliminary analysis reveals that the company will get benefit in respect of its PPA (1424 MW) to Haryana power distribution firms and PPA (3,300 MW) with such Maharashtra companies as also with PPA (1200 MW) with Rajasthan firms. However, CGPL would continue to work towards alternatives, including sourcing of competitive & alternative coals to best contain the onslaught of under recovery.

The latest Supreme Court order has impacted the shares of both the companies.

The analysts said failure to obtain tariff relief for the Mundra plant implies Rs 15 per share downside to its target price of Rs 90 for Tata Power.

Adani Power is down 5.4% at Rs 35.20, once again tumbling on heavy volumes. A petition was filed with CERC seeking compensatory tariff hike and compensatory relief. "The project was unviable from Day 1, given the risk of dependence on coal from Indonesia and foreign exchange fluctuation".

  • Eleanor Harrison