| Green Infra Renewable Energy Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
| ||||
| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| Detailed Rationale |
|
CRISIL has reaffirmed its 'CRISIL AA-/Stable' rating on the long-term facilities of Green Infra Renewable Energy Limited (GIREL). |
| Analytical Approach |
|
For arriving at the ratings, CRISIL has combined the business and financial risk profiles of Sembcorp Green Infra Ltd (SGIL) and its special-purpose vehicles (SPVs), including GICSL and Sembcorp Energy India Ltd (SEIL). That is because all the entities, collectively referred to as the Sembcorp Energy India group, are engaged in the power generation in India, have a common management, and are all critical to the group. The group has a track record of supporting renewable group entities, and after debt servicing in each SPV, the excess cash flow is largely available for use across the group. (Refer to annexure for a list of the group's entities). |
| Key Rating Drivers & Detailed Description |
|
Strengths: * Management and financial support derived from ultimate parent Sembcorp Industries: SCI, currently operating in diverse segments such as energy, water, marine, and urban development, is present across 15 countries. It has capacity of over 13,000 MW of gross power generation, and close to 9 million cubic metre of water treatment per day in operation and under development. It is also a world leader in offshore and marine engineering. With total assets of over SGD 23 billion, SCI is listed on the main board of the Singapore Exchange. It is 49.5% owned by Temasek, a Singapore government-held entity. Sembcorp Industries, in an exchange filing on June 8, 2020 has proposed a capital restructuring plan and a subsequent demerger of its majority owned subsidiary Sembcorp Marine. The implementation of the plan is however, subject to final approval by shareholders and other procedural requirements. Also, the proposed restructuring is expected to improve the financial profile of SCI on account of healthy accruals from the utilities business and de-merger of Sembcorp Marine, which had weaker operating performance compared to overall SCI over past 2 years. It is also expected that shareholding of Temasek will continue to be around 49% in SCI post the proposed restructuring. SCI has supported its assets globally and in India during adverse situations. For instance, it provided support for thermal power assets in India. CRISIL believes the Sembcorp Energy India group is critical to the business of Sembcorp Industries and shall benefit from managerial and financial support from the parent, if required. Any deviation from this will be a key rating sensitivity factor. * Support derived from being part of the Sembcorp Energy India group GIREL enjoys strong managerial support from the group. It benefits from the group's demonstrated track record of execution and ramp-up of projects, and support offered to SPVs in the renewable portfolio, for instance, aid extended to wind power projects commissioned during fiscal 2019, as they were facing tariff issues. The group is likely to maintain adequate liquidity to meet any exigencies or shortfall. Any deviation from the policy of support will be a key rating sensitivity factor. The group derives its strength from its diverse portfolio of commissioned capacity of 2,640 MW thermal power and 1,656 MW wind and solar power as of March 2020. It has operational assets in Karnataka, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Tamil Nadu, and Andhra Pradesh. Of the total portfolio of 4,367 MW, the group draws strong revenue visibility from long-term PPAs for around 60% of capacity with over nine state distribution companies (discoms), Bangladesh Power Development Board, and Solar Energy Corporation of India/ PTC (apart from various group captive consumers). Furthermore, SEIL has won a letter of award for a long-term PPA with an Andhra Pradesh discom for 625 MW. This will take the total long-term capacity tied up through PPAs to 85%. * Strong revenue visibility and healthy financial risk profile due to robust blended DSCR and adequate liquidity support GIREL has signed a 25-year PPA with PTC India Ltd, wherein it will supply power generated from its 249.9-MW wind power plant at a fixed tariff of Rs 3.46/unit for 25 years from start of commercial operations. Payments from PTC India Ltd have been received in a timely manner, in line with PPA terms. Project was commissioned in October 2018 within the stipulated time and cost. GIREL is expected to have an average DSCR of around 1.2 times at P-90 plant load factor (PLF). Besides this, there is adequate liquidity, for debt servicing during adverse conditions, to be kept as a part of the transaction in the form of a) one quarter DSRA (debt service reserve account) b) working capital limit of around 180 days of receivables. Weaknesses: * Exposure to risks inherent in operating renewable projects Cash flows of renewable power projects are sensitive to the plant load factor (PLF), which depend entirely on wind and solar patterns that are inherently unpredictable. This could impact the group's debt servicing capability. * Exposure to counterparty risk and merchant price movements for thermal power unit The Sembcorp Energy India group has 2,640 MW of coal-based thermal power plants. It has long-term PPAs for 1,320 MW, on net generation basis, of this capacity. Sale of power generated from the balance untied capacity on a short-/medium-term basis, exposes this capacity to volatility in merchant rates. Until the capacity gets tied up in a long-term PPA, quantum of power sold at a rate exceeding the variable cost of generation, will remain a key monitorable. A large proportion of the long-term PPAs for thermal power capacity are with discoms of Andhra Pradesh and Telangana, and with Bangladesh Power Development Board. The group has been managing any irregularities in payments from any of the counterparties for thermal capacity through working capital bank debt. Though implementation of the payment security mechanism by way of issuance of letter of credit (LC) should benefit power generating entities, including the Sembcorp Energy India group, the extent of the benefit and its impact on the receivable position are monitorables. |
| Liquidity Strong |
|
The Sembcorp Energy India group has strong liquidity. Cash flow available for debt servicing is projected at over Rs 2,650 crore per annum over fiscal 2021, against yearly long-term debt obligation (including principal and interest payment) of around Rs 2,000 crore. The group has completed its investment requirement in fiscal 2021. CRISIL believes the Sembcorp Energy India group has sufficient liquidity to cover its debt obligation, with consolidated cash levels of above Rs 1,500 crore as of March 2020. Further, support can be taken from Sembcorp Industries, if required. Additionally, for the thermal projects, fund-based limit was utilised at an average of about 70% for project 1 and around 35% for project 2 during the six months through January 2020. |
| Outlook: Stable |
|
CRISIL believes GIREL will sustain its credit profile over the medium term, backed by steady growth in revenue and profitability, continued support from the Sembcorp Energy India group, and better operating performance of the consolidated Sembcorp Industries group. |
| Rating Sensitivity factors |
|
Upward factors * Improvement in the credit profile of Sembcorp Energy India group * Commissioning and ramp up of renewable portfolio of Sembcorp Energy India group's under-construction portfolio such that more than 75% of the portfolio outperforms the P90 PLF on a sustained basis Downward factors * Weakening of credit quality or support philosophy of Sembcorp Industries towards the Sembcorp Energy India group * Pressure on GIREL's credit quality, owing to sustained weaker than P90 performance or stretch in receivables |
| About the Company |
|
GIREL is a 100% held indirect subsidiary of SEIL that has 249.9-MW operational wind power project (COD in October 2018) in Tuticorin, Tamil Nadu. GIREL has signed a 25-year PPA with PTC India Ltd, in line with the LOA at a fixed tariff of Rs 3.46/unit. |
| Key Financial Indicators - GIREL (Standalone; CRISIL adjusted numbers)* | ||||||||||||||||||||||||
|
|
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
| Annexure - Details of Instrument(s) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - List of entities consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
| For further information contact: | ||||||
|