Rating Rationale
April 04, 2023 | Mumbai
RFE Belgaum Solar Private Limited
Rating reaffirmed at 'CRISIL A- / Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.65.97 Crore
Long Term RatingCRISIL A-/Stable (Reaffirmed)
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 A-/Stable' rating on the long-term bank loan facility of RFE Belgaum Solar Private Limited (RBSPL; part of the AMP group).

 

The rating continues to reflect the healthy revenue visibility provided by long-term power purchase agreements with industrial clients, the moderate financial risk profile of RBSPL, and support derived from being part of the AMP group. These strengths are partially offset by exposure to risks arising from variability in solar irradiance and concentration in a single asset.

 

The company’s PLF had been lower that P90 levels and accordingly In FY2023, the company conducted the P90 study again and as per the new PVsyst report, the P90 has been revised to 23.8% for FY2023.

Analytical Approach

To arrive at the rating, CRISIL Ratings has considered the standalone business and financial risk profiles of RBSPL.

Key Rating Drivers & Detailed Description

Strengths

Healthy revenue visibility

The company has 10-years’ power purchase agreements (PPA) at pre-determined tariffs with various counterparties under the open access. The buyers, SPR Distilleries Pvt Ltd, Goodrich Aerospace Services Pvt Ltd, Hewlett Packard Enterprise and Nextra are industrial customers with strong credit risk profiles. The company is confident of finding another off-taker with similar tariff rates post the expiry of current PPA. The average payment cycle has been less than 30 days from the counterparties since COD.

 

Moderate financial risk profile

Healthy weighted average tariff of Rs 4.3 per unit under the PPAs has led to a moderate debt service coverage ratio (DSCR) over the tenor of the debt. RBSPL was set up at a project cost of Rs 83 crore. The AMP group infused funds through equity and compulsorily convertible debentures (CCDs). The terms of the CCDs state that the interest servicing will happen after the yearly obligation to senior lenders is fulfilled. Hence, CRISIL Ratings has calculated the DSCR excluding the payments on the CCDs.

 

Support derived from being part of the AMP group

The company benefits from an experienced management team in India and the expertise of the ultimate parent, AMP Group Inc. The group has been involved in the development and operation of solar projects of around 2 GW in India. The group has demonstrated financial flexibility by raising funds from multiple investors like CBRE Caledon Capital (a Canada-based infrastructure and private equity solutions provider), Colorado-based Zoma Capital and global investment firm, the Carlyle Group. The Indian holding company, AMP Energy India Private Limited, has secured an investment from LGT Lightstone (part of the LGT group; one of the largest family-owned private banking and asset management group in Europe) of USD 50 million to fund growth in India while another investment of USD 45 million has been committed at a sub-holding company from Core Infrastructure Investment Fund and SMBC Bank (Japan) along with AMP solar Technology Private Limited (Parent company of Ampsolar Clean Power Pvt. Ltd. ) under a joint venture. The group has also secured an investment from Copenhagen Infrastructure Partners (Denmark-based renewable energy focused fund manager) of USD 150 million. CRISIL Ratings understands that the group will continue to provide financial support to the rated entity in case of any exigencies.

 

Weaknesses:

Susceptibility to variability in solar irradiance

Solar power generation depends on the radiation level at a given location. Changes in average temperature around the location or in performance of poly crystalline modules may affect power generation, leading to sharper degradation in solar panels. Given that the cash flow of a solar power project is most sensitive to the plant load factor (PLF), these risks may impair debt servicing capability of projects.

 

The company has been operational since March 2018. PLF for the past few years have been below P90 levels, largely due to grid connectivity issues or variability in solar irradiance. The project is also backed by performance guarantees from the supplier and operations and maintenance (O&M) contractor, Rays Power Infra Pvt Ltd. Given that the company’s P90 levels have been revised in FY2023, the project should maintain performance levels above P90 PLF going forward.

 

Concentration risk arising from single asset operations

The company has a 15 MW (AC) power plant in Karnataka, and hence, remains exposed to concentration risk. The debt service reserve account (DSRA), covering obligation for about six months, mitigates this risk.

Liquidity: Adequate

Liquidity is marked by expected cash accrual of around Rs 11 crore per fiscal in 2023 and 2024, against debt obligation of around Rs 9-9.5 crore as per CRISIL Ratings projections. The company has fixed deposits covering debt obligation of two quarters, to tide over any cash flow mismatch, and has also built an inverter reserve of Rs 1.50 crore.

Outlook: Stable

CRISIL Ratings believes that RBSPL will benefit from stable cash flows backed by timely payments from buyers over the medium term.

Rating Sensitivity factors

Upward factors

  • Sustained performance better than P90 PLF
  • Faster deleveraging, leading to DSCR of above 1.30x on sustained basis over the remaining debt tenure

 

Downward factors

  • Weaker performance leading to PLF below P90 levels on a sustained basis
  • Stretch in receivables or higher O&M expenses, straining the credit quality

About the Company

RBSPL operates a 15-MW (AC) solar power project at Albal village in Bagalkot, Karnataka. The project was commissioned in March 2018.

Key Financial Indicators

Particulars  Unit  2022 2021
Revenue Rs crore 14 13
Profit after tax (PAT) Rs crore 2 1
PAT margin % 12.3 3.9
Adjusted debt/adjusted networth Times 1.8 2.1
Interest coverage Times 1.76 1.52

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA Term loan NA 10.35% Apr-36 65.97 NA CRISIL A-/Stable
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 65.97 CRISIL A-/Stable   -- 16-02-22 CRISIL A-/Stable   -- 11-12-20 CRISIL A-/Stable CRISIL A-/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan 65.97 India Infradebt Limited CRISIL A-/Stable

This Annexure has been updated on 20-Apr-2023 in line with the lender-wise facility details as on 11-Apr-2023 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Criteria for rating solar power projects
Understanding CRISILs Ratings and Rating Scales

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