| Malwa Solar Power Generation Private Limited | ||
| 'CRISIL AAA/Stable ' Converted from provisional rating to final rating for Non Convertible Debentures | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has converted its provisional rating assigned to the Rs 197 crore non-convertible debentures (NCDs) of Malwa Solar Power Generation Pvt Ltd (MSPGPL) into a final rating of ‘CRISIL AAA/Stable’. The company is part of Vector Green Restricted Group (VGRG), which comprises six special purpose vehicles (SPVs), including Citra Real Estate Ltd (CIREEL), Yarrow Infrastructure Pvt Ltd (YIPL), MSPGPL, RattanIndia Solar2 Pvt Ltd (RSPL), Sepset Constructions Ltd (SCL) and Priapus Infrastructure Ltd (PIL). The aggregate amount of the NCDs of VGRG is Rs 1,237 crore.
For conversion of the provisional rating into a final one, CRISIL Ratings has reviewed the signed term sheet shared by the company and the pre-execution version of the debenture trust deed and cross-guarantee documents.
The rating remains unchanged despite reduction of the tenure of the NCDs from five years to three years, as the amortisation schedule for these three years is in line with earlier expectation of ~14%. Moreover, refinancing would be initiated nine months before the bullet at the end of the third year. Furthermore, as per the signed term sheet, the coupon for the NCDs is also lower by around 100 basis points.
The rating reflects strong revenue visibility and counterparty profile, co-obligor structure of the SPVs providing diversity and a healthy financial risk profile. These strengths are partially offset by exposure to risks inherent in operating solar energy assets and those related to refinancing. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of the six SPVs of VGRG, in line with the criteria of CRISIL Ratings for rating entities in homogeneous groups, and has 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, as they are in the same line of business of operating solar power assets, have a common management and treasury team and are critical to VGRG.
Each of the SPVs acts as a co-obligor to the other, with each providing a corporate guarantee to the debt obligation and cross-default (that is, default on any conditions in one SPV leads to default in all other SPVs) of all other SPVs. Following debt servicing in each SPV, excess cash flow is largely available for use across the group. Any deviation in this understanding shall be a key rating sensitivity factor.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths * Strong revenue visibility and counterparty profile All 256-megawatt (MW) projects within VGRG have 25-year power purchase agreements (PPAs) at pre-determined tariffs. The 250-MW projects (around 98% of portfolio by capacity) have PPAs with central counterparties—that is, Solar Energy Corporation of India (SECI) and National Thermal Power Corporation—at tariffs ranging from Rs 4.36/ kilowatt-hour (kWh) to Rs 5.45/kWh. The remaining 6-MW projects have PPAs at a fixed tariff for 25 years with Maharashtra State Electricity Development Corporation Ltd and Uttar Pradesh Power Corporation Ltd, with tariffs ranging from Rs 17.91/kWh to Rs 18.41/kWh.
The PPAs provide revenue visibility and stability to the cash flow given the track record of payments from these central counterparties in the past five years. Additionally, VGRG projects have been operational for over three years and have a satisfactory performance track record, as reflected in above P90 plant load factor (PLF; on an aggregate basis) in fiscal 2021.
* Co-obligor structure of SPVs providing diversity All projects within each SPV are co-obligors for projects in the other five SPVs. The group’s diversity is reflected in its presence in five states and PPAs with four counterparties. With the presence of this co-obligor structure, surplus cash flow after debt servicing in any SPV will be available to fund shortfall in the other SPVs (if any), thus supporting the consolidated debt service coverage ratios (DSCRs). Additionally, as part of structure conditions, SPVs have undertaken that distributable surplus amount in any SPV shall first be utilised to cover any shortfall in debt servicing or maintain reserve in other SPVs before distribution to the sponsors.
* Healthy financial risk profile Financial risk profile is expected to be healthy, indicated by average DSCR of over 1.50 times through the three-year tenure of the NCDs (at CRISIL Ratings sensitised projections done at P90 PLF). Furthermore, liquidity is supported by debt service reserve account (DSRA) of six months of debt obligation in the form of cash or bank guarantee without any recourse to project assets.
The financial risk profile is also supported by a cash sweep covenant. It specifies that if DSCR falls below 1.40 times in any year or 12-month period (depending upon the period of testing), then the entire surplus shall be swept and used for debt prepayment.
Weaknesses * Exposure to refinancing risk The VGRG SPVs are exposed to the risk of refinancing bullet of Rs 1,061 crore at the end of the three-year tenure. That said, healthy business risk profile of the underlying assets and robust blended DSCRs over the available useful life of projects, extending to around 15 years (on a capacity weighted basis), partially offset risks with respect to refinancing. Moreover, refinancing would be initiated nine months before the bullet at the end of the third year.
* Susceptibility to risks inherent in operating solar energy assets 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 the highest for PLF, these risks could severely impair the debt servicing and free cash flow 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 obligation of less than Rs 150 crore per fiscal in both the fiscals. Additionally, no major capital expenditure has been planned in these years. The SPVs will have DSRA of six months to cover any cash flow mismatch. |
Outlook :Stable The VGRG SPVs are expected to benefit from comfortable cash flow, backed by 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 Madhya Pradesh. The plant became fully operational in 2015. The company has signed a long-term PPA at a pre-determined tariff with SECI.
MSPGPL is a subsidiary of Vector Green Energy Pvt Ltd, which operates wind and solar power projects aggregating 652 megawatt peak 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, a leading infrastructure investor managing over $70 billion of assets, including 15 gigawatt of renewable assets globally. |
Key Financial Indicators
^ - Includes interest on sponsor loans and excludes amortization of VGF grant * - compulsorily convertible and non-convertible debentures from sponsors/ promoters classified as equity related instruments |
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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