MPL RATING

(The following statement was released by the ratings agency)

Sept 30 - Fitch Ratings has today affirmed at 'BBB+(ind)' India's Maithon Power Ltd.'s (MPL) long-term project bank loans aggregating INR31,150m and the non-fund based exposure aggregating INR581m (the latter serves as performance security and is executed in the form of a bank guarantee). The agency has also assigned a 'BBB+(ind)' rating to MPL's new guarantee limits of INR1bn. The Outlook is Stable.

MPL is a special-purpose company created solely to develop, own and operate a power generating facility ("the project") in the eastern state of Jharkhand. The project, to consist of two 525-MW coal-based thermal power plants, is expected to be commissioned in October 2010 and April 2011. It is a 74:26 JV between The Tata Power Company Ltd (TTPW.BO: Quote, Profile, Research). (Tata Power) and the state-owned Damodar Valley Corporation (DVC). The project is being implemented through the 'package' route by reputed equipment suppliers and contractors. Tata Power is the project management services provider and will be responsible for Operations and Maintenance (O&M).

The ratings affirmations follow the reasonable progress by MPL over the last year in achieving different project milestones during the critical construction phase, although as a whole, the company is slightly behind plans. There has been progress with the different aspects of physical construction and equipment delivery. Vendors for residual balance of plant packages such as water handling, ash handling and railway infrastructure systems have also been finalised, while drawdown of debt and equity is proceeding as per schedule.

Also Fitch notes there is now greater certainty on the off-take arrangements with the signing of a bankable long-term power purchase agreement (PPA) for 300MW with North Delhi Power Ltd. (NDPL) through Tata Power Trading Company Ltd. (TPTCL,'BBB+(ind)'/Stable), a 100% subsidiary of Tata Power. The PPA with DVC for 300MW is now being modeled along the lines of the PPA with NDPL (which has been approved by the lending bankers).

For the remaining capacity, a Power Sale Agreement (PSA) has been signed by TPTCL with Punjab State Electricity Board in February 2009 for 300MW; MPL will have to sign back-to-back PPAs with TPTCL. 150MW will be sold to the West Bengal State Electricity Distribution Company Ltd (WBSEDCL) through TPTCL; WBSEDCL has filed the signed PPA with West Bengal Electricity Regulatory Commission for approval. A regulatory change earlier this year allowing for a higher (15.5%) return on equity in the tariff at which power is sold, as determined by the appropriate regulatory commission, is a positive.

Key rating concerns emanate from the continued delay in executing the fuel supply agreement (FSA) and difficulties relating to land availability for the railway siding facilities; the latter can potentially hinder timely project completion. The Government of India has allocated 4.864 MMTPA of coal to the project; however, the FSA with the state-owned Coal India Ltd. or its subsidiaries has yet to be concluded, although Fitch notes the power department of the federal government has initiated steps to facilitate expeditious signing of the FSA.

Although MPL management is reportedly making contingency plans for the transportation of coal by trucks in the event of a delay in completing the railway facility, Fitch believes this to be, at best, a stopgap measure. Continued inability to conclude satisfactory arrangements for the railway infrastructure beyond the next two months will act as a trigger for a review of the credit profile.