The ratings continue to draw strength from Adani Power (APL) strong parentage being part of the Adani group, financial support from the promoter group by way of infusion of equity, unsecured loans, group's diversified presence in various sectors predominantly in energy businesses, substantially large power generation capacity in operation, long-term Power Purchase Agreements (PPAs) in place for off-take of majority of power, availability of adequate transmission infrastructure and softening of imported coal prices.

The ratings, however, continue to remain constrained on account of substantial delay in resolution of APL's dispute related to compensatory tariff (CT) with its power off-takers than what was previously envisaged which has led to substantial under-recovery of its power generation cost in the backdrop of its largely fixed rate tariff PPAs which has adversely impacted its liquidity, with significant build-up of CT receivables on its books.

The rating also continue to remain constrained by inordinate delay in refinancing of its outstanding External Commercial Borrowings (ECBs) than what was previously envisaged and consequent adverse impact on its debt coverage indicators in light of substantial installment obligations falling due in near term, entailing significant financial support from the promoters for timely debt servicing. It is, however, noted that APL has made reasonable progress in its refinancing efforts, which is expected to be concluded shortly.

The ratings also remain constrained by APL's exposure to fuel price risk, susceptibility to foreign exchange rate fluctuations, high leverage and risk associated with its aggressive expansion plans.

The ultimate determination of quantum of CT in APL's fixed price PPAs along with its receipt, improvement in domestic coal supplies under Fuel Supply Agreement (FSA), improvement in merchant power tariff rates, quantum of dividend & interest income from its subsidiaries, improvement in its profitability and leverage along with need based financial support from the promoter group are the key rating sensitivities.

Shares of the company declined Rs 0.6, or 2.18%, to trade at  Rs 26.95.  The total volume of shares traded  was  290,438 at the BSE (11.25 a.m., Friday).