| ReNew Wind Energy (AP) Private Limited | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL ratings on the bank facilities of ReNew Wind Energy (AP) Private Limited (RWEPL) continue to reflect support RWEPL derives from being part of Renew Power group. Renew Power's business risk profile has improved following the addition of 1.1 GW of assets of Ostro, which are largely operational (about 85%), and have long-term power purchase agreements (PPAs), a diversified, albeit modest, counterparty profile, healthy plant load factor (PLF) of P90, and attractive tariffs. Project-level debt service coverage ratios (DSCRs) remain healthy. The rating also benefits from Renew Power's policy of maintaining liquidity covering at least 6 months of debt obligation. However, this is partially offset by high gearing of 3.4 times post acquisition-related debt at the holding company level. Based on the management's guidance, CRISIL believes the consolidated gearing will be brought down and maintained around 3 times till end of fiscal 2020. |
| Analytical Approach |
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For arriving at its rating, CRISIL has combined the business and financial risk profiles of Renew Power and all its special purpose vehicles (SPVs), collectively referred to as the Renew Power group, as they have significant business, financial, and managerial linkages, are in the same business, and have common management and treasury team. Renew Power has an established track record of supporting the group entities and has also articulated support towards these entities. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Leading market position with a fairly seasoned and geographically diversified portfolio The Renew Power group is the largest renewable energy player in the country with a portfolio of 5.7 GW (including capacity under construction and in the pipeline), with a commissioned portfolio of over 4 GW. The portfolio comprises a diversified group of assets, with renewable assets in eight states: Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka. The portfolio is fairly seasoned, and assets with track record of more than a year increased from 30% in July 2017 to over 57% in November 2018, aided by the acquisition of Ostro assets. Around 80% of the portfolio has PPAs with long tenure of 25 years, ensuring healthy revenue visibility. * Healthy P90 PLF and long-term tariffs supporting healthy project-level DSCR RWEPL has an established operational track record at both its wind sites, Chikodi and Lingasugur in Karnataka, which have performed largely in line with PLF of P90 for 2018 (Chikodi's PLF was 24.7% and Lingasugur's was 28.3%). Debt repayment has been structured at PLF of P90, based on wind assessment studies by third-party consultants. Assuming a P90 PLF, RWEPL is likely to have healthy DSCR of over 1.4 times. RWEPL has signed long-term PPAs of 10 years at both Chikodi and Lingasugur with industrial and commercial consumers. The PPAs provide for a payment security mechanism with letter of credit/bank guarantee equivalent to 30-60 days of billing. This protects RWEPL from risk of non-payment by customers. Tie-up of power sales under the captive third-party consumer model has lowered sales risk and diversified counterparty exposure over the medium term. The group has an overall P90 PLF of around 27% and a blended tariff of around Rs 4.3/unit, including under-construction projects. These support a healthy project-level consolidated DSCR of about 1.3 times for both the wind and solar assets. This cushion helps in timely servicing even with resource variability, such as the weak wind season in the past 2 years. * Well-diversified, albeit modest, counterparty risk profile The Renew group's portfolio is diversified in terms of counterparty risk, given its pan-India presence in renewable-resource-rich states. Although the counterparty risk profile is modest, receivables are stable at around 4.5 months for November 2018, 3 months at the end of fiscal 2018 from 6 months at the end of fiscal 2017. Sustenance of receivable cycle will remain critical for the Renew Power group. * Strong managerial and financial support derived from being part of the Renew Power group All the SPVs of the group, including RWEPL, are likely to receive strong managerial support from Renew Power. The management has a policy of extending corporate guarantees for the project debt of SPVs in the initial stage and providing financial support to all SPVs if there is any cash flow mismatch after commissioning of the projects. CRISIL believes Renew Power will maintain adequate liquidity to meet any exigency. Any change in the group's support philosophy is a key rating sensitivity factor. * Adequate liquidity and high financial flexibility with demonstrated track record of fund raising The group maintains adequate liquidity, indicated by cash balance of over Rs 2500 crore on consolidated basis as of February 2019. Almost all bank-funded projects require debt service reserve account (DSRA) with obligation for 1-2 quarters (maintained as a combination of bank guarantee and cash). The group also has a stated policy of keeping liquidity buffer of at least Rs 1500 crore, including debt obligation of 2 quarters, on an overall portfolio basis. It has a range of investors, many of which have infused capital in progressive rounds. The group's growth has been supported by fund infusion of USD 1080 million (around Rs 7000 crore) over the six fiscals from 2012. This demonstrates capability to raise adequate capital ahead of investment. CRISIL believes adequate funds will be available from the sponsors to support growth. Weaknesses: * Increased leverage, particularly on account of Ostro acquisition Renew Power's consolidated debt increased from Rs 12,780 crore as on March 31, 2017, to Rs 24,927 crore as on March 31, 2018 and further to Rs 26,042 as on September 30, 2018 which also included holding company debt of around Rs 3400 crore on the holding company. As a result, gearing at the consolidated group level increased from 2.3 times to 3.4 times as of March 2018. CRISIL expects in line with management articulation the leverage to improve with gearing at ~3 times over the next fiscal primarily by reducing the debt at the holding company either through utilisation of accruals, and / or, plans to raise equity capital over the medium term. The debt at the holding company is expected to come down to Rs.2,500 crores in the next 4-6 months. Any deviation in the understanding of timing, quantum and the application of cash to reduce debt will be key rating sensitivity factors. * Implementation risk for under-construction projects Renew Power has about 1.6 GW of under-construction projects which face implementation risk. The risk is mitigated by the quality of suppliers and the group's demonstrated track record of project execution. Achievement of designed PLF of P90 post stabilisation will be a key rating monitorable. * Exposure to risks inherent in operating renewable assets Cash flow of wind power projects is sensitive to PLF, which depends entirely on wind and solar patterns, which are inherently unpredictable. This can be seen in two wind seasons in fiscal 2018 and 2017 which were unfavourable, impacting PLF and accruals. |
| Liquidity |
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The liquidity at the holding company i.e. Renew Power Ltd is adequate, driven by expected cash accruals of around Rs 150 crore in fiscal 2020 and Rs 200 crore in fiscal 2021, and cash and cash equivalents of more than Rs. 700 crore as of February 2019. The company has long term repayment obligations around Rs. 680 crore in fiscal 2020 and Rs 2930 crore in fiscal 2021. CRISIL understands major portion of these repayments would be met through debt reduction plans of Renew Power group or refinancing. The company also has investment requirements of more than Rs. 1000 crore in fiscal 2021 and fiscal 2022 in its subsidiaries which will be managed by equity raise and utilising a portion of accruals. |
| Outlook: Stable |
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CRISIL believes RWEPL will benefit from stable cash accrual backed by long-term PPAs, performance of projects at PLF of P90, and support from the group, if required. |
| About the Group |
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RWEPL, a SPV of Renew Power Limited has operational capacity of 58 MW in Karnataka. Its Chikodi plant has nine wind turbine generators (WTGs) with capacity of 2 MW each, set up on a turnkey basis by Gamesa Renewable Pvt Ltd. The project cost of Rs 126.8 crore was funded in a debt-to-equity mix of 75:25. The project commenced commercial operations in June 2013. The Lingasugur plant has 20 WTGs with capacity of 2 MW each. The project cost of Rs 310.0 crore was funded through debt of Rs 233.0 crore and through equity brought in by RPVPL. |
| 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) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 various bank facilities | ||||||||||||||||||||||||||||||||||||
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