| ReNew Wind Energy (AP) Private Limited | ||||||
| Rating outlook revised to 'Negative'; ratings reaffirmed | ||||||
| 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 has revised its rating outlook on the long-term bank facilities of ReNew Wind Energy (AP) Private Limited (RWEAPPL; part of the Renew Power group) to 'Negative' from 'Stable' and reaffirmed the rating at 'CRISIL A+. The short term rating has been reaffirmed at 'CRISIL A1'. |
| 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). That's because all these companies, collectively referred to as the Renew Power group, have significant business, financial, and managerial linkages, are in the same business, and have common management and treasury teams. Renew Power has an established track record of supporting the group entities and has also articulated continued support to them. |
| Key Rating Drivers & Detailed Description |
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Strengths * Benefits derived from being part of the Renew Power group All the SPVs of the group are likely to receive strong managerial and financial support from the Renew Power group. 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 if there are any cash flow mismatches after commissioning the projects. Renew Power is likely to maintain adequate liquidity to meet any exigency. Any change in the group's support philosophy is a key rating sensitivity factor. * Strong market position of the group The strong market position is driven by size, diversity, vintage, and healthy revenue visibility of the asset portfolio. The group is the largest renewable energy player in India with a portfolio of around 7.6 gigawatt (GW; including capacity under construction and under development), with a mix of 3.0 GW of solar projects and 4.6 GW of wind projects. The group had a commissioned capacity of around 4.6 GW as of June 2019. Commissioned projects of around 4.1 GW had more than one year of operational track record as of June 2019. Moreover, the operational portfolio has a satisfactory track record of generation with the overall portfolio performing better than the blended P90 plant load factor (PLF) of around 22% in fiscal 2019. The group portfolio has diversified projects in terms of location and counterparty. The assets are present in eight states: Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka. These assets have strong revenue visibility, with around 80% of the portfolio having power purchase agreements (PPAs) of long tenure of 25 years at pre-determined tariffs with over 15 state and central counterparties. * Benefits from the group's healthy financial flexibility and track record of equity raising The group has a sound track record of raising funds in Indian and overseas debt and capital markets. Additionally, it maintains adequate liquidity as indicated by an unencumbered cash balance of over Rs 3,000 crore on a consolidated basis as of August 2019. The group also has a stated policy of keeping liquidity buffer of at least Rs 1,500 crore, apart from project level debt service reserve accounts (DSRAs), on an overall portfolio basis. The group has a range of marquee investors including Goldman Sachs and Canadian Pension Plan Investment Board, many of which have infused capital in progressive rounds. Growth has been supported by fund infusion of over Rs 10,000 crore since 2012, including equity infusion of USD 300 million (around Rs 21,500 crore) in the first half of fiscal 2020. This demonstrates the capability to raise adequate capital ahead of planned investments. Adequate funds are likely to be available from the sponsors to support future growth plans. Weaknesses * Cash flows exposed to volatility in payment from weak counterparties The counterparties are state distribution companies (discoms), several of which have weak credit risk profiles. Cash flow from operations (measured as net cash accrual adjusted for increase in receivables) fell to around Rs 100 crore in fiscal 2019 from around Rs 600 crore in fiscal 2018 despite the increase in revenue. This was on account of increase in payment delays by some state discoms including those in Andhra Pradesh and Telangana. The group has been supporting impacted projects through cash flows from other projects and liquidity at the holding company. However, prolonged delays in correction of the payment cycle from these state discoms would put stress on cash flows and group liquidity, and will be a rating sensitivity factor. * Average financial risk profile The consolidated debt as on March 31, 2019, was Rs 28,998 crore. This consisted of project level and holding company debt of around Rs 2,300 crore, which is not backed by any project's cash flows. The debt coverage ratio of project-level debt has weakened compared with previous expectation, with the blended average DSCR coming down to around 1.25 times1 as on March 31, 2019, from around 1.30 times a year earlier. This DSCR has lowered due to additional debt or top-ups taken on operational projects. The expected correction in the total debt/EBITDA ratio should be slower in fiscal 2020 (at 7.2 times as on March 31, 2019) as the debt will remain higher to provide liquidity support due to payment delays by counterparties. The ratio is likely to improve to around 6.5 times by fiscal 2021 driven by management plans to reduce holding company debt. Delay in this leverage correction, and reduction of holding company debt will be rating sensitive factors. * Implementation risk for under-construction projects The group had about 1.9 GW of under-construction projects as of June 2019, which face implementation risk. However, the risk is mitigated by the quality of suppliers and the group's demonstrated track record of project execution. * Exposure to risks inherent in operating renewable assets Cash flows of renewable power projects are sensitive to PLF, which depend entirely on wind and solar patterns that are inherently unpredictable. This was evident in two wind seasons in fiscal 2018 and 2017, which were unfavourable, thus impacting PLF and cash accrual. Liquidity: Adequate The group's liquidity is adequate, driven by expected cash accrual (after interest servicing) of over Rs 1,400 crore in fiscal 2020 and over Rs 1,700 crore in fiscal 2021 at P90 PLF projections. The group has debt repayment obligation of around Rs 1,120 crore in fiscal 2020 and around Rs 3,200 crore in fiscal 2021. CRISIL understands the major portion of these repayments in fiscal 2021 would be met through debt reduction plans of the holding company or refinancing. Additionally, the group had an unencumbered cash balance of above Rs 3,000 crore as of August 2019 at the holding company. A portion of this cash would also be used for investment requirement of around Rs 1,200 crore in fiscal 2020 and around Rs 1,000 crore in fiscal 2021 as equity investments in under-construction projects. Under-construction project SPVs are expected to raise debt funding to finance implementation of under-construction projects of the group. Additionally, all operational project SPVs have DSRAs with reserves for 1-2 quarters of debt servicing (maintained as a combination of bank guarantee and cash). |
| Outlook: Negative |
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CRISIL believes the leverage correction of the Renew Power group may take longer than expected. Downward factors |
| About the Company |
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RWEAPPL, a special purpose vehicle of Renew Power Ltd, 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 via equity brought in by RPVPL. |
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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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