The 4,000 mw Mundra Ultra Mega Power Project of Tata Power’s subsidiary, Coastal Gujarat Power has primarily caused Tata Power to suffer a downgrade in its credit rating from ‘stable’ to ‘negative’.

The ratings agency, CRISIL, which termed the Mundra UMPP unviable, has commented that Tata Power’s profitability will be “lower-than-expected over the near term because of the lower-than-expected dividends from the coal companies partly owned by Tata Power.

The lower dividend income would not be sufficient to offset the standalone losses at the Mundra project, CRISIL said. For the first half of the current year, Coastal Gujarat Power made a net loss of Rs 626 crore.

In a separate rating exercise, CRISIL has also downgraded Coastal Gujarat Power to ‘negative’. Tata Power is by agreement required to support Coastal Gujarat by way of additional funding for meeting any cost overruns and debt servicing until such time certain financial covenants are attained. That’s why the Mundra Project is a burden on Tata Power.