| Renew Solar Power Private Limited | ||||
| Rating removed from 'Watch Positive'; Rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its rating on the bank facilities of Renew Solar Power Private Limited (Renew Solar Power; part of the Renew Power group) from ‘Rating Watch with Positive Implications’ and reaffirmed the long-term rating at ‘CRISIL A’, while assigning ‘Stable’ outlook.
The rating was placed on ‘Rating Watch with Positive Implications’ on March 5th, 2021 following the announcement that Renew Power Limited (Renew Power) had entered into a definitive business combination agreement with RMG Acquisition Corporation II (RMG II) and proposed public listing of the group on NASDAQ. CRISIL Ratings has removed the rating from Watch Positive as the business combination of Renew Power group with RMG II has been successfully completed and the group has been listed on NASDAQ on August 24th, 2021. Renew Power has received net proceeds amounting to USD ~700 million from the transaction and the transaction is also expected to increase financial flexibility of the company with enhanced access to international debt and equity capital. The group, however, has witnessed a higher than expected increase in receivable days (at over 260 days as of March 2021) and lower than expected operational performance of the portfolio (especially wind) in fiscal 2021, impacting the operating cash flows. Over fiscal 2022-2023, CRISIL Rating expects an improvement in receivables days and operational performance coupled with reduction in debt from listing proceeds. This will help improve leverage ratios from a CRISIL Ratings adjusted Gross Debt/ EBITDA (CRISIL Ratings adjusted EBITDA, not factoring in the group’s interest income and extraordinary provisions written back) of ~ 8.3 times in fiscal 2021 to under 7 times in fiscal 2022 and fiscal 2023 (and net debt /EBITDA from ~7 times in fiscal 2021 to under 6 times in fiscal 2022 and 2023). A higher delay in this correction will be a rating sensitivity factor. The group’s Net Debt/ EBITDA was around 6.5 times and Operating Net Debt/ Operating EBITDA (the ratio factors in Gross debt, Cash balances and EBITDA only for projects operational for at least one year as of March 2021) was around 5.5 times as of March 2021.
The rating reflects benefits derived from being part of the Renew Power group, which has a strong market position, healthy financial flexibility, and track record of equity raising. These strengths are partially offset by exposure to the group’s project implementation risks, an average financial risk profile due to increase in receivables, and exposure to risks inherent in operating renewable energy assets. |
Analytical Approach For arriving at its rating, CRISIL Ratings 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.
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: 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 extends support on case to case basis on project debt of SPVs in the initial stages of implementation and stabilisation and also provides financial support to all group SPVs, if there are any cash flow mismatches after commissioning the projects. Renew Power is likely to maintain adequate liquidity to meet any exigency support across the group. 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 10 GW (including capacity under construction and under development), with commissioned capacity of around 6 GW as of July 2021 with 60% wind and 40% solar projects. Commissioned projects of around 5.3 GW had more than one year of operational track record as of March 2021. The group portfolio has diversified projects in terms of location and counterparty. The assets are present in the states of Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, Uttar Pradesh, Uttarakhand and Karnataka. These assets have strong revenue visibility, with majority 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.
Group’s healthy financial flexibility and track record of equity raising The group has an established track record of raising funds in Indian and overseas debt and capital markets. 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. Further in August 2021, Renew Power has been listed on NASDAQ which further enhances its access to international debt and equity capital markets. This is expected to support further equity raises for future growth plans.
Additionally, the company has fund based working capital lines of above Rs 2000 crores as of March 2021 at Renew group level. The group is expected to maintain liquidity buffer (unencumbered across group) of above Rs 2,000 crore, apart from project level debt service reserve accounts (DSRAs), which can be used across overall portfolio basis.
Weaknesses Average financial risk profile stemming from increased receivables Counterparties (for project SPVs) include state distribution companies (DISCOMs), several of which have weak credit risk profiles. Although the receivable days shot up to around 262 days as of March 2021 (from 197 days in March 2020), on account of increase in payment delays by some state DISCOMs due to COVID-19, receivable days are expected to be lower for the fiscal ending March 2022, but material delays in correction of the payment cycle will be a rating sensitivity factor.
The consolidated debt for group as on March 31, 2021, was Rs 34,705 crore, heightened on account of increase in receivables. This kept leverage measured through Debt/ EBITDA at 7.6, for fiscal 2021 (CRISIL Ratings adjusted Debt/ EBITDA[1] at 8.3). Leverage correction, over medium term, is expected to happen through expected improvement in receivable position and usage of USD ~150 million out of the proceeds from listing transaction to be utilized towards debt reduction.
Implementation risk for under-construction projects The group had around 4.6 GW of under-construction projects as of July 2021, which can potentially 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 through weaker than P90 performance of the group’s portfolio in fiscal 2021, primarily due to lower PLFs in wind power projects. Improvement in performance of portfolio with respect to P90 projections going forward shall be a monitorable. [1] CRISIL Ratings adjusted EBITDA does not factor in the group’s interest income and extraordinary provisions written back |
Liquidity: Adequate The liquidity for Renew group is expected to be adequate, driven by expected cash accruals of around Rs 1829 crore in fiscal 2022, and free cash of more than Rs 3000 crore as of March 2021. With infusion of USD ~700 million as net proceeds from SPAC transaction, liquidity position has further been strengthened. The company has sufficient liquidity to cover capex equity requirement in fiscals 2022 and 2023. CRISIL Ratings understands major portion of the repayments would be met through refinancing by longer tenor debt instruments (bullet payments for projects having long life and tied up PPAs).
All operational project SPVs being implemented in subsidiaries have debt service reserve account (DSRA) with obligation for 1-2 quarters (maintained as a combination of bank guarantee and cash). Renew Power Group is expected to maintain liquidity buffer of Rs 2000 crore (unencumbered across group). Additionally, the group has fund based working capital lines for support across portfolio at holding company of over Rs 2000 crore. |
Outlook Stable CRISIL Ratings expects credit profile of Renew group entities to remain stable driven by an expected reduction in receivables days and ensuing correction in net Debt/ EBITDA. |
Rating Sensitivity factors Upward factors • Swift improvement in the financial risk profile of the group • Improvement in operating cash flows through material correction in receivable days to below 180 days
Downward factors • Net Debt/ EBITDA[1] remaining above 6 times by March 2023 • Receivables remaining higher than expected • Deterioration in performance of operational portfolio for fiscal 2022 [1] CRISIL Ratings adjusted EBITDA, not factoring in the group’s interest income and extraordinary provisions written back |
About the Company Renew Solar Power has a 20 MW solar power plant in Karnataka. The plant was commissioned in October 2019.
The Renew Power group is the largest player in the Indian renewable energy space, with a 5.96 GW operational portfolio. It was established in 2011 by Mr. Sumant Sinha. It has a range of solar and wind assets in Gujarat, Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, Telangana, and Madhya Pradesh, Uttar Pradesh and Tamil Nadu. |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 4-Oct-2021 in line with the lender-wise facility details as on 4-Oct-2021 received from the rated entity.
Criteria Details
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