Coastal Gujarat Power, subsidiary of Tata Power has announced that it is deliberating to raise up to Rs 1,300 crore in a bond sale as it pursues to refinance prevailing offshore loans. The bonds are backed by the parent company to provide comfort to investors and better pricing. The final pricing has not yet been fixed. The base size of the planned issue is Rs 600 crore with a choice to preserve oversubscription of Rs 700 crore.
The deal is not yet sealed as the company is negotiating with bond arrangers. The proposed deal may come up for official bidding this week on the exchange platform. As many as eight domestic arrangers are in talks with Coastal Gujarat Power, which is expected to take a final call in the next few days. The bonds are rated with AA (SO). Structured Obligation, or SO, is an additional credit support that comes from Tata Power being its parent company.
“The rating assigned factors in credit enhancement in the form of unconditional and irrevocable corporate guarantee backed by Tata Power... which has undertaken to meet CGPL’s debt obligation forthwith on demand,” rating company CARE said in a note on April 3. CGPL, the subsidiary that built the 4,000 MW Mundra ultra mega power project, has agreements to sell electricity to five state utilities. According to CARE, the states are Gujarat (1,805 MW), Maharashtra (760 MW), Punjab (475 MW), Haryana (380 MW) and Rajasthan (380 MW) for 25 years at a levelised tariff of Rs 2.26 per unit, with only a partial pass through (45 per cent) of fuel costs, thereby exposing the company to fuel price risks. During FY18, CGPL’s loss widened to Rs 1,721.31 crore from Rs 849.74 crore a year ago.
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