Standard & Poor's Ratings revised the outlooks on its long-term corporate credit ratings for India-based NTPC Ltd. and NHPC Ltd. to stable from negative. At the same time, the 'BBB-' ratings on the two companies and the 'BBB-' issue ratings on NTPC's senior unsecured debt have been affirmed.
The outlook revision follows a similar action on the sovereign credit rating on India (BBB-/Stable/A-3). See article titled "India Outlook Revised To Stable From Negative On Our Expectation Of An Improvement In The Country's Fiscal Position," published March 18, 2010, on RatingsDirect.
The outlooks on NTPC and NHPC have been revised because their ratings are highly influenced by the sovereign rating given their sensitivity to government intervention in the event of financial distress. This is based on our view of the following characteristics in accordance with our criteria for government-related entities:
* "very high" likelihood of extraordinary government support for NTPC; and
* "high" likelihood of extraordinary government support for NHPC.
Our assessment of the likelihood of government support is primarily on account of the majority shareholding by the government with the administrative control by the Ministry of Power and the companies' public policy role of increasing India's power generation capacity. Nevertheless, NTPC's stand-alone credit profile continues to be better than its current rating.
The stable outlook reflects the outlook on the sovereign credit rating of India and our expectation of stable operations for both the companies.