(ADPnews) - Sep 21, 2010 - CRISIL said on Monday it had removed the ratings on the bank facilities of Tata BP Solar India Ltd from rating watch with "negative implications" and affirmed the ratings at AA-/stable/P1+.
The rating action is based on discussions that CRISIL has had with TBP’s management. CRISIL believes that the liabilities of TBP’s majority owner (51%), BP Plc (LON:BP) (rated A/watch negative/A-1 by Standard & Poor’s), pertaining to the explosion at BP’s Deepwater Horizon rig in the Gulf of Mexico and the blowout at its sub-sea Macondo well, are not likely to have any direct impact on TBP’s credit risk profile. This is because BP has plugged the leak at the oil rig, and has announced sale of assets to adequately fund the liability recognised so far for the oil spill. Besides, TBP’s scale of operations is small relative to that of BP.
The ratings continue to factor in the benefits that TBP derives from its operational linkages with BP and the financial support that TBP receives from both its promoters, BP and Tata Power Company Ltd (BOM:500400) (rated AA/positive/P1+ by CRISIL). TBP is likely to account for 35% to 40% of BP’s global cell manufacturing capacity over the long term. CRISIL believes that TBP will also reap significant benefits from the Tata group’s thrust on solar energy generation over the long term. The ratings also reflect TBP’s moderate but improving financial risk profile, marked by a healthy capital structure and adequate liquidity.
These rating strengths are partially offset by TBP’s exposure to risks related to the nascent stage of solar energy market in India and this sector’s dependence on fiscal incentives for growth. The company is also exposed to risks of delays in completion of its ongoing expansion project and maintaining adequate utilisation thereafter.
CRISIL believes that TBP will continue to benefit from its comfortable business profile supported by the linkages with BP’s solar energy business and the healthy medium term prospects for the domestic solar energy industry. The outlook may be revised to "positive", if there is sustained, high level of utilisation at TBP’s recently expanded facilities, which would benefit its financial risk profile. Conversely, the outlook may be revised to "negative", if there is lesser-than-expected offtake from the recently completed units, there is a change in BP’s strategy for its solar power business, or if there is a steep decline in TBP’s margins.
Rating agency website: www.crisil.com
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