| Aditya Birla Renewables Utkal Limited | ||||
| Rating reaffirmed at 'CRISIL AA/Stable' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable’ rating on the long-term bank facilities of Aditya Birla Renewables Utkal Limited (ABRUL; part of the Aditya Birla Renewables [ABR] group).
The ABR group includes ABReL, its special-purpose vehicles (SPVs) —Aditya Birla Renewables SPV 1 Ltd (ABReL SPV1), Aditya Birla Subsidiary Ltd (ABRSL), Aditya Birla Renewables Utkal Ltd (ABRUL), Aditya Birla Renewables Energy Ltd (ABReL Energy), Aditya Birla Renewables Solar Ltd (ABReL Solar), ASPL, ABREL SPV 2 Ltd (ABReL SPV2), ABREL Century Energy Ltd (ACEL), ABREL Green Energy Ltd (AGEL), ABREL (Odisha) SPV Ltd (AOSL), ABREL (MP) Renewables Ltd (AMRL) and Waacox Energy Pvt Ltd (Waacox) — and Aditya Birla Solar Ltd (ABSL; merged with ABReL in July 2023).
The rating continues to reflect the strong financial, operational and managerial support provided by the parent, Grasim Industries Ltd (Grasim; 'CRISIL AAA/Stable/CRISIL A1+’), and the long-term tariff structure with Aditya Birla group companies and state counterparties, which enhances revenue visibility.
The rating also factors in the limited counterparty risk, with around 96% of the group’s capacity tied up with counterparties with strong credit risk profiles. These strengths are partially offset by exposure to risks related to project execution and stabilisation of operations and risks inherent in renewable energy generation.
CRISIL Ratings takes note of the recent debt raise of Rs 1,000 crore by ABReL to fund the ABR group’s capital expenditure plans towards new projects. Further, CRISIL Ratings understands that the debt raised is temporary in nature and shall be re-paid over near term either from the proceeds received from a minority equity stake sale to investors and/or through fund infusion by Grasim. |
Analytical Approach Based on its criteria for rating entities in homogenous groups, CRISIL Ratings has combined the business and financial risk profiles of ABReL, its SPVs — ABReL SPV1, ABReL SPV2, ABReL Energy, ABReL Solar, ABRSL, ABRUL, Waacox, ASPL, ACEL, AGEL, AMRL and AOSL — and ABSL. These entities, collectively referred to as the ABR group, are in the same business and have a common management, treasury and promoter (Grasim). CRISIL Ratings understands that after servicing of debt and meeting covenants of lenders, excess cash flow from SPVs will be available for expansion as well as for upstreaming as dividend. Also, the ABR group houses all renewable power assets of the Aditya Birla group.
CRISIL Ratings has also applied its parent notch-up framework to factor in the financial, operational and managerial support available to the ABR group from Grasim.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Grasim has significant control over the management and operations of the ABR group. Captive consumption by key Aditya Birla group entities and centralised resources strengthens the linkages. Grasim will remain in control of the overall operations and finance of the ABR group. The parent has infused equity in the past and demonstrated its commitment to providing need-based support through fund infusion in the group SPVs.
CRISIL Ratings understands that Grasim is currently under discussions with investors for sale of a minority stake in the ABR group. However, CRISIL Ratings understands that Grasim will continue the hold the majority stake of ABR group. Further, CRISIL Ratings believes that the strong support from the parent to the ABR group will continue. Also, if there is any cost overrun or lower-than-expected cash flow because of change in operating parameters, ABReL, from its surplus cash flow or with the support of Grasim (if required), is expected to infuse funds into the group SPVs to maintain threshold debt service coverage ratio (DSCR). With Grasim as the parent, the group has access to bank funding at competitive rates. The credit risk profile of Grasim, its expansion plans in the renewable energy space and support policy are key rating sensitivity factors.
Commissioning of 278.9 megawatt peak (MWp) of solar and 45.8 megawatt (MW) of wind capacities, over the past couple of years, underpins the strong execution capability of the group. It now has operational capacity of 795 MWp solar and 45.8 MW of wind power, and an under-construction capacity of 896 MWp of solar and 157.4 MW of wind power. The projects are spread across Andhra Pradesh (AP) and Karnataka in south India; Gujarat and Maharashtra in the west; Madhya Pradesh (MP) in central India; Chhattisgarh and Odisha in the east; and Uttar Pradesh (UP) and Rajasthan in the north, reducing concentration risk.
Of the total capacity (including operational and under-construction), around 39.4% of assets have power purchase agreements (PPAs) of 22-25 years with Grasim, UltraTech Cement Ltd (UltraTech; ‘CRISIL AAA/Stable/CRISIL A1+’), Hindalco Industries Ltd (Hindalco; ‘CRISIL A1+’) and Century Enka Ltd (CEL; ‘CRISIL A+/Stable/CRISIL A1+’), at tariff of Rs 3-4.55 per unit.
For the remaining capacity, the group has signed 25-year PPAs with multiple state distribution companies at a fixed tariff. It has tied up 951.4 MWp with Gujarat Urja Vikas Nigam Ltd (GUVNL) at Rs 2.33-2.66 per unit, 105.0 MWp with Grid Corporation of Odisha (GRIDCO) at Rs 2.99-3.06 per unit, 44.60 MWp with Hubli Electricity Supply Company Ltd (HESCOM) at Rs 4.92-4.97 per unit, 24.44 MWp with Maharashtra State Power Generation Company Ltd (MAHAGENCO) at Rs 2.94-3.05 per unit and 22.30 MWp with Bangalore Electricity Supply Company Ltd (BESCOM) at Rs 4.36 per unit.
Furthermore, the group has an operational 156-MWp asset (of which 122.4 MWp is operational) with GUVNL as a counterparty, wherein it has signed a 25-year PPA at a base tariff of Rs 1.99 per unit with provision to pass through increase in project cost arising out of regulatory changes, including a hike in customs duty. CRISIL Ratings understands that the ABR group has filed for retrospective revision (from date of commissioning) of the tariff to Rs 2.66 per unit (due to regulatory changes including custom duty hike), which is pending with Gujarat Electricity Regulatory Commission (GERC). Implementation of the revised tariff will be a key monitorable.
The group received payment in less than 30 days in fiscals 2022 and 2023 for bulk of the capacity. The payment cycle for HESCOM assets (2.35% of the total capacity) improved to 2-3 months from 9-10 months, while MAHAGENCO and BESCOM assets (2.47%) dues stood at ~2-3 months in fiscal 2023.
In the AP project (1.16% of total capacity), with UltraTech as the counterparty, the group supplies power through the open access route. While short-term open access (STOA) approval was granted in April 2021, at the time of execution of the agreement, there was a dispute over applicability of wheeling charges. Subsequently, the ABR group approached the AP Electricity Regulatory Commission and received a favourable ruling. Also, it has executed the STOA agreement and has started receiving pending payments.
Upcoming capacities, both captive and non-captive, will mostly use crystalline technology bi-facial modules with trackers for solar capacities and equipment from prominent suppliers for wind capacities, as these are more reliable. Also, in line with current assets, the projects will likely have a warranty against all manufacturing defects. Counterparties with healthy credit risk profiles for bulk of the capacity enhance the revenue visibility and minimise counterparty risk.
Weaknesses:
Operating performance (weighted average capacity-wise) has remained slightly below P90 level on account of project-specific factors. For instance, some of the recently commissioned projects in Chhattisgarh, MP and Odisha reported lower irradiation levels and disruption owing to storms and excessive soiling losses. Reduced plant availability impacted projects in Gujarat, MP and Maharashtra. While the group is taking corrective measures to ensure better uptime and protection through deemed generation clauses in PPAs (for assets in Maharashtra), sustained generation at less than P90 level will be a key rating sensitivity factor.
Out of the group’s assets, 9.6% (136.2 MWp of solar and 45.8 MW of wind capacities) have an operating track record of less than a year. Furthermore, 55.6% of assets (896.0 MWp of solar and 157.4 MW of wind capacities) are under construction. Thus, the group faces implementation and stabilisation risks. However, its healthy execution track record, calibrated expansion strategy, prudent funding mix and support from Grasim aid the business risk profile. Any expansion will be backed by strong visibility for evacuation and PPAs; any significant deviation from this will be a rating sensitivity factor.
Solar power plants face technology-related risk. Power generation depends on irradiation levels around the plant and annual degradation in solar panels. Similarly, wind power generation remains vulnerable to seasonality and variance in wind intensity. Given that cash flow is highly sensitive to plant load factor (PLF) in solar as well as wind assets, these risks could severely impair debt servicing and free cash flow. CRISIL Ratings will continue to monitor PLF levels as a key rating sensitivity factor. |
Liquidity: Strong The group’s liquidity remains strong, with expected cash available for debt servicing (including interest) of around Rs 1,965 crore over next couple of fiscals (fiscal 2025 and fiscal 2026) against debt obligation of around Rs 1,600 crore during this period. Ongoing projects (except in Waacox) are being financed through 80% of debt and 20% via internal accrual and equity support from Grasim, with funding tie-ups already in place. The projects in Waacox have been financed through 70% debt and 30% equity. Most of the debt carries a repayment schedule of 15-20 years, including a one-year moratorium for principal obligation, allowing for operations to stabilise. Furthermore, most assets need to maintain a debt service reserve account balance of one quarter. The group will likely follow a similar funding arrangement, with equity support from the parent, for upcoming projects. Moreover, Grasim is likely to provide timely, need-based support. |
Outlook: Stable The ABR group will remain strategically important to, and continue to receive strong managerial, operational and financial support from, Grasim. Stable cash accrual, backed by long-term PPAs and performance of projects at healthy PLFs, should continue. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company and Group Incorporated on August 7, 2015, ABReL has 282.8 MWp of operational solar capacity across Karnataka (20 MWp), Gujarat (145.4 MWp), Odisha (105 MWp) and Andhra Pradesh (12.4 MWp). It has entered into a 22-year PPA with Grasim and 25-year PPAs with GUVNL and GRIDCO. Initially, Aditya Birla Nuvo Ltd (ABNL; part of the Aditya Birla group) held 51% stake in ABReL, while AEIF Mauritius SPV 2 Ltd (AEIF; an Abraaj group affiliate) held 49%. Following the merger of ABNL with Grasim (effective July 1, 2017) and purchase of stake from the Abraaj group (May 2018), Grasim holds the entire stake in ABReL. On June 27, 2018, ABReL acquired 49% stake in Waacox and on July 5, 2021, it acquired the remaining 51%, making Waacox a wholly owned subsidiary.
ABSL was incorporated in 2016 to participate in solar auctions in Karnataka. It has operational capacity of 100.18 MWp. Grasim held 100% stake in ABSL. ABSL was merged with ABReL in July 2023. It entered into a 25-year PPA with BESCOM for 22.3 MWp and HESCOM for 44.6 MWp.
Waacox was set up by Sangam Renewables Ltd (Sangam) in fiscal 2016 to bid for projects under the Solar Agriculture Feeder Scheme in Maharashtra. ABReL acquired 49% stake in the company in June 2018 and executed a shareholding agreement to acquire the remaining 51% from Sangam after one year from the date of commissioning of projects. In July 2021, it acquired the remaining 51% stake, making Waacox its 100% subsidiary. Waacox has 24.4 MWp of operational capacity in Maharashtra, with MAHAGENCO as the sole procurer for the entire capacity.
Incorporated on June 19, 2017, ABReL SPV1 has 77.8 MWp of operational solar capacity across Maharashtra (1.95 MWp), Rajasthan (6 MWp), Karnataka (25.5 MWp), Gujarat (5 MWp), Chhattisgarh (29.8 MWp) and Andhra Pradesh (9.6 MWp). ABReL holds 74% stake in ABReL SPV1, and UltraTech, which is also a captive power procurer for the entire capacity, holds 26%.
Incorporated on May 8, 2018, ABRSL has 34.2 MWp of solar capacity in Odisha and Chhattisgarh. ABReL holds 74% stake in ABRSL, while 26% is held by Hindalco, the captive power procurer for the entire capacity.
Incorporated on May 8, 2018, ABRUL has 7 MWp of solar capacity in Utkal, Odisha. ABReL holds 74% stake in ABRUL, while 26% is held by Utkal Alumina International Ltd, a subsidiary of Hindalco, the captive power procurer for the entire capacity.
Incorporated on April 10, 2020, ABReL Solar has operational solar capacity of 79.2 MWp in Madhya Pradesh, Maharashtra, Gujarat and Uttar Pradesh, and wind capacity of 21 MW. Further, setting up a 11.7 MW solar and 21 MW wind project in Karnataka. ABReL holds 74% stake in ABReL Solar, while Hindalco, the captive power procurer for the entire capacity, holds the remaining.
Incorporated on April 13, 2020, ABReL Energy has operational solar capacity of 27.1 MWp in Madhya Pradesh and Rajasthan. ABReL holds 74% stake in ABReL Energy, while 26% is held by UltraTech, which is also the captive power procurer for the entire capacity.
Incorporated on December 28, 2020, ABReL SPV2, a 100% subsidiary of ABReL, has constructed 122.37-MWp solar capacity in Gujarat. The remaining 33.63 MWp is expected to be commissioned by January 2024. The company has signed a 25-year PPA with GUVNL, which is also the sole offtaker for the entire capacity. Further, the company is developing 650 MWp with GUVNL as the counterparty.
Incorporated on August 31, 2021, ASPL has operational capacity of 46MWp of solar capacities in Odisha and Gujarat, and 14.3 MW wind in Gujarat. It also has 54 MWp of solar and 86 MW of wind project under construction in Madhya Pradesh. ABReL holds 74% stake in ASPL, while 26% is held by Grasim, the captive power procurer for the entire capacity.
Incorporated on March 10, 2022, ACEL has operational capacities of 13-MWp solar and 10.5-MW wind in Mahuva, Gujarat, commissioned in June 2023. ABReL holds 74% stake in ACEL, while 26% is held by CEL, the captive power procurer for the entire capacity.
Incorporated on June 15, 2022, AOSL has operational 14.20 MWp solar capacity in Hirmimunda, Odisha. Additional capacity 9.20 MWp expected to become operational by December 31, 2023. ABReL holds 74% stake in AOSL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.
Incorporated on June 22, 2022, AGEL is setting up 93 MWp solar capacity in Kurma, Chhattisgarh. ABReL holds 74% stake in AGEL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.
Incorporated on June 16, 2022, AMRL is constructing solar capacity of 44.4 MWp and wind capacity of 50.5 MW in Madhya Pradesh. ABReL holds 74% stake in AMRL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.
All the solar assets of the ABR group are funded in a debt-to-equity ratio of 80:20 (except Waacox, at 70:30). ABReL will be the holding company for all assets of the ABR group, with the captive power procurer—mainly an Aditya Birla group entity—holding at least 26% share. |
Key Financial Indicators – ABRUL – CRISIL Ratings-adjusted numbers
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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