(The following statement was released by the rating agency)
July 02 - Fitch Ratings has downgraded India-based Meenakshi Energy Private Ltd's (MEPL) Phase I INR10,600m and Phase II INR23,400m senior bank loans to 'Fitch D(ind)' from 'Fitch BB(ind)'/Outlook Negative.
The downgrade reflects delays in the payment of interest on the term debt caused in particular by delays to the commencement of commercial operations for phase I of its new coal-based thermal power plant. Unless sponsor equity is injected, the company is unlikely to meet the first principal repayment on its Phase I loan, falling due on 30 June 2012, on time.
Furthermore, according to the lender's engineer's report, Phase II of the coal-based thermal power plant is expected to be delayed by 15 months from the scheduled completion date of 31 August 2012. The likely cost overruns on both phases, especially interest payment during construction, will add further stress to the project.
Fitch notes that the first unit of Phase I is currently in the advanced stage of testing and commissioning. Positive rating action may result from cash injection by sponsors for timely debt servicing, stabilisation of the plant's performance after commercial operations and evidence of the project's cash generation at forecasted levels, so as to enable timely debt service on a sustained basis.
MEPL, promoted by the Meenakshi group of companies, is implementing coal-based thermal power plants in two phases of 300MW (two units of 150MW each) and 600MW (two units of 300MW each) in the coastal area of Thaminappatnam in the state of Andhra Pradesh at a cost of INR14,280m and INR31,200m, respectively.