| Malwa Solar Power Generation Private Limited | ||
| 'Provisional CRISIL AAA / Stable' assigned to Non Convertible Debentures | ||
| Rating Action | ||
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| & A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive by the Securities and Exchange Board of India, 'Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies'. | ||
| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA/Stable’ rating to the Rs 197 crore non-convertible debentures (NCDs) of Malwa Solar Power Generation Pvt Ltd (MSPGPL) which is part of Vector Green Restricted Group (VGRG) of six special purpose vehicles (SPVs) including Citra Real Estate Ltd, Yarrow Infrastructure Pvt Ltd (YIPL), MSPGPL, RattanIndia Solar2 Pvt Ltd (RSPL), Sepset Constructions Ltd (SCL) and Priapus Infrastructure Ltd (PIL). The total aggregate amount of these NCDs of VGRG is Rs 1,237 crore.
For assigning the provisional rating, CRISIL Ratings has reviewed the draft term sheet shared by the company. The provisional rating will be converted into a final rating on receipt of the signed term sheet and / or financing documents with contours of structure in line with the draft term sheet.
The rating reflects strong revenue visibility and counterparty profile, co-obligor structure of SPVs providing diversity benefit and a healthy financial risk profile. These strengths are partially offset by exposure to risks inherent in operating solar energy assets and refinancing risk. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of the six SPVs in VGRG in-line with CRISIL's criteria for rating entities in homogeneous groups and equated the rating of the individual SPVs to the group. The six entities consolidated as VGRG are MSPGPL, CIREEL, YIPL RSPL, SCPL and PIL. The entities are in a homogeneous group since they are in the same line of business of operating solar power assets, have common management and treasury team and are critical to VGRG. Each of the SPVs acts as a co-obligor to the other with each giving corporate guarantee to all other SPV’s debt obligations and cross default (i.e. default on any conditions in one SPV leads to default in all other SPVs). Post debt servicing in each SPV, excess cash flows are largely available for use across the group. Any deviation in this understanding shall be a key rating sensitivity factor.
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:
All 256 megawatt (MW) projects within VGRG have 25-year Power Purchase Agreements (PPAs) at fixed pre-determined tariffs. 250 MW projects (~98% of portfolio by capacity) have PPAs with central counterparties that is Solar Energy Corporation of India (SECI) and National Thermal Power Corporation (NTPC) at tariffs ranging from Rs 4.36/kWh to Rs 5.47/kWh. The balance 6 MW have PPAs at fixed tariff for 25 years with Maharashtra State Electricity Development Corporation Ltd (MSEDCL) and Uttar Pradesh Power Corporation Ltd (UPPCL) with tariffs ranging from Rs 17.91/kWh to Rs 18.41/kWh.
The PPAs provide revenue visibility and stability to cash flows given the track record of payments from these central counterparties over past 5 years. Additionally, VGRG projects have been operational for over 3 years with performance track record being satisfactory as seen through above P90 PLF performance (on aggregate basis) in fiscal 2021.
All projects within each SPV are co-obligors for projects in the other five SPVs. The group has diversity with presence in 5 states and PPAs with 4 counterparties. With the presence of this co-obligor structure, surplus cash flows after debt servicing in any SPV will be available to fund the shortfall in other SPVs (if any), thus supporting the consolidated debt service coverage ratios (DSCRs). Additionally, as part of structure conditions, SPVs have undertaken that if there is any distributable surplus amount in any SPV, then it shall first be utilised to make good any shortfall in debt servicing or maintenance of reserves in other SPVs before distribution to the sponsors.
Financial risk profile is expected to be healthy marked by an average DSCR of around 1.45 times through the tenure of 5 year NCDs (at CRISIL Ratings sensitised projections done at P90 PLF). Further, liquidity shall be supported through debt service reserve account of 6 months of debt servicing obligations in form of cash or bank guarantee without any recourse to project assets.
The financial risk profile is also supported by cash sweep covenant. It specifies if in any year or 12 month period (depending upon period of testing) DSCR falls below 1.4 times, then entire surplus shall be swept and used for debt prepayment.
Weaknesses:
VGRG SPVs are exposed to risk of refinancing bullet of Rs 933 crore at the end of 5 year tenor. That said, healthy business profile of underlying assets and robust blended DSCRs over available useful life of projects, extending to around 15 years (on capacity weighted basis) mitigate risks with respect to refinancing. Moreover, refinancing plan would be initiated 9 months before the bullet at end of 5th year.
The PLF for solar power projects is exposed to variability in climatic conditions and equipment and evacuation related risks. Given that the sensitivity of cash flow of a solar power project is highest for PLF, these risks could severely impair debt-servicing and free cash flows of such projects. |
Liquidity: Superior Liquidity in VGRG Solar SPVs is driven by expected earnings before interest and depreciation of over Rs 210 crore per fiscal in 2022 and 2023 at P90 level of plant generation. The SPVs have debt obligations of less than Rs 150 crore in both years. Additionally, there is no planned capex. The SPVs will also have DSRA of 6 months to cover any cash flow mismatches. |
Outlook: Stable VGRG SPVs are expected to benefit from stable cash flows on back of long term PPAs and stable operational performance. |
Rating Sensitivity factors Downward factors
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About the Company MSPGPL operates a 40 MW solar power plant in state of Madhya Pradesh. The plant became fully operational in 2015. It has signed a long term purchase agreement at pre-determined tariff with SECI.
MSPGPL is a subsidiary of Vector Green Energy Pvt Ltd (VGEPL). VGEPL operates wind and solar power projects aggregating 652MWp located across 19 projects and 12 states in India. It is owned by funds managed by Global Infrastructure Partners India LLP - the Indian af'liate of Global Infrastructure Partners (“GIP”), a leading infrastructure investor managing over US$70 bn of assets including over 15 GW of renewable assets globally. |
Key Financial Indicators
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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)
^Yet to be placed |
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. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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