Detailed Rationale

CRISIL Ratings has revised the outlook on the long-term bank facility of Rudra Solarfarms Private Limited (RSPL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘CRISIL BBB+’.

 

CRISIL Ratings has also withdrawn its rating on Rs 6.23 crore of long-term bank loan facilities upon request from the entity due to scheduled repayments of term loan and receipt of requisite documentation in line with the withdrawal policy of CRISIL Ratings.

 

The revision in outlook reflects weaker operating performance driven by plant load factor (PLF) remaining below P90 levels leading to lower-than-expected cash accruals and stretch in the receivables due to delay in payments from Telangana Southern Power Distribution Company Ltd (TSSPDCL). The average PLF of the asset for the last 5 years through fiscal 2022 was 22% (21.95% in fiscal 2022) which is well below the P90 levels of 23.5% (adjusted by annual degradation of 0.75%). Any reduction in the generation levels from the average levels i.e. 22% will remain a key rating sensitivity factor.

 

Lower generation along with the delay in payment from the counterparty (receivables position increased to ~Rs. 25 crore [575 days] as of June 2022 as compared to ~Rs. 11 crore [241 days] as of March 2021) resulted in weakening of the liquidity position and liquidation of debt service reserve account (DSRA) of Rs 5.5 crore. Company received timely support from the group in form of short-term loan of Rs 3 crore to meet out the debt obligations. The company has started receiving the previous dues through the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 supported by REC Limited (CRISIL AAA/Stable/CRISIL A1+) and Power Finance Corporation (PFC; CRISIL AAA/Stable/CRISIL A1+), and current dues from TSSPDCL. The receivables position has eased to Rs. 18 crores [416 days] as of September 2022. However, any delay in receipt of installments and current dues will remain a key rating sensitivity factor.

 

The rating continues to reflect the comfort that the company derives from the long-term power purchase agreement (PPA) with TSSPDCL, which ensures high revenue visibility, support derived from Amp group and moderate financial risk profile. These strengths are partially offset by plant performance lower than P90 levels and stretched receivables due to a weak counterparty risk profile.

Analytical Approach

For arriving at its rating, CRISIL Ratings has considered the business and financial risk profiles of RSPL on a standalone basis, using CRISIL Ratings criteria for rating solar power projects.

Key Rating Drivers & Detailed Description

Strengths

• Revenue visibility through tie-up of long-term power purchase agreement (PPA)

The company has a 25-year (valid till 2042) long-term PPA with TSSPDCL for the entire capacity of 15 megawatt (MW) at a fixed tariff of Rs 5.59 per kilowatt hour (Kwh). The operation and maintenance (O&M) of the plant is tied up with Suzlon Global Services Ltd (Suzlon Global) for the first 10 years of operations, which also mitigates plant availability risks.

 

• 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 globally. It has demonstrated financial flexibility by raising funds from multiple investors. ASSPL is part of a project financing equity arrangement involving CBRE Caledon Capital, a Canada-based infrastructure and private equity solutions provider. The AMP group also enjoys investment from 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 under a joint venture. The group has also secured an investment from Copenhagen Infrastructure Partners (Denmark-based renewable energy focused fund manager) of USD 100 million. This partnership aims to develop 1.7 GW of utility-scale and commercial and industrial renewable energy projects.

 

RSPL’s Singapore-based parent, AMPSolar Asia Holdings PTE Ltd and the holding company AMPSolar Ventures Private Limited, has provided an unconditional and irrevocable guarantee for the company’s term loan till project stabilization (includes achieving of P90 levels and other covenants as well). During April 2022, RSPL has received support in form of Short-Term Loan (STL) of Rs 3 crore from group special-purpose vehicle (SPV) to meet out the debt obligation and operational expenditure at RSPL due to stretched receivable payments by TSSPDCL. RSPL has also received support in the form of Inter Corporate Deposits (ICDs) from other group entities in the past. Furthermore, CRISIL Ratings understands that the group will continue to provide financial support to RSPL in case of any exigencies.

 

• Moderate financial risk profile

The project is funded in a debt-equity mix of 74:26 with a long debt tenor of 16 years. Equity for the project is in the form of 13% compulsory convertible debentures (CCDs) subscribed by the promoter and which are convertible into equity after 20 years. The coupon payment on the CCDs is subordinate to debt servicing and has so far only been accrued. With its high tariff and long-term PPA, average debt service coverage ratio (DSCR) is healthy for the project. Moreover, a tail period of 6 years provides strong refinancing ability.

 

Weaknesses:

• Stretched receivables due to weak counterparty risk profile

The company has tied up offtake agreement with TSSPDCL, which has a weak credit risk profile. Timely realization of dues is susceptible to the health of the counterparty and can significantly impact RSPL’s debt serviceability. The receivables position stands at ~ 416 days (~Rs. 18 crore) as of September 2022 after peaking around 575 days (~Rs. 25 crore) as of June 2022. While the company has started receiving prior dues in form of installments under new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 and current dues from TSSPDCL, timely receipt of instalments as well as current dues will remain a key rating monitorable.

 

• Susceptibility to variation in solar irradiance

Solar power generation depends on the radiation level in a given location. Changes in the average temperature around a plant's location or in the performance of polycrystalline modules may affect power generation and can also result in higher-than-expected 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 the debt-servicing capability of projects.

 

The company’s project has seen operating performance below P-90 levels (average PLF was 22.1% over fiscals 2018-22 against P-90 levels of 23.5% over the same period). This has been largely due to a prolonged monsoon in 2020, Covid-19 impacting O&M operations in 2021 and lower than expected irradiance level in 2022. Existing performance guarantees from O&M contractor, Suzlon Global, will allay systemic project generation risks. However, going forward, the PLF levels will remain a key monitorable.

Liquidity: Adequate

Liquidity is adequate marked by cash and equivalents of Rs. Rs 7.09 crore as of October 31, 2022. While the DSRA was liquidated in fiscal 2022, company has replenished the DSRA equivalent of two quarter of debt servicing requirements by the end of this fiscal year. The annual cash accruals along with the existing cash and equivalents should be adequate in meeting the debt obligations for fiscal 2023. Further, need-based financial aid from the parent and group companies, supports liquidity.

Outlook: Negative

Operating performance may weaken due to delay in payments from the counterparties while the generation may continue to remain below the P-90 levels. However, the company will benefit from stable revenue visibility backed by long term PPA and timely support from group entities.

Rating Sensitivity factors

Upward factors:

• Improvement in operating performance with PLF achieving P90 levels on a sustained basis
• Sustained and significant reduction in receivables along with significant improvement in liquidity position of the company.
• Significant decline in debt leading to material improvement in DSCR

 

Downward factors:

• Weakening of the operating performance with reduction in the PLF below average levels (22%) impacting the cash accruals or sustenance of high receivables position above 7-8 months.
• Any change in the support philosophy from the AMP group to RSPL
• Increase in debt leading to substantially lower DSCR.

About the Company

RSPL is an SPV floated by Suzlon Energy Ltd (Suzlon) as a part of the 210 MW of solar projects that Suzlon had won in Telangana through a competitive bidding process in 2015. In December 2016, Suzlon sold 49% stake in RSPL to the AMP group for Rs 14 crore with an option to sell the remaining 51% to the group. The AMP group acquired the remaining stake in RSPL in January 2019.

 

RSPL owns a 15 MW AC (18 MW DC) solar photovoltaic plant in Telangana. The project was commissioned in June 2017.

Key Financial Indicators

Particulars	Unit	2022	2021
Revenue	Rs crore	16	16.5
Profit after tax (PAT)	Rs crore	(1.7)	(0.9)
PAT margin	%	(10.8)	(5.3)
Interest coverage	Times	1.4	1.3
Adjusted debt/adjusted networth	Times	8.8	9.2

*As per analytical adjustments made by CRISIL Ratings

Any other information: Not applicable

Annexure - Details of Instrument(s)

ISIN	Name of instrument	Date of allotment	Coupon rate (%)	Maturity Date	Issue size (Rs. Crore)	Complexity Level	Rating assigned with outlook
NA	Term Loan	NA	8.95%	Jun-35	75.09	NA	CRISIL BBB+/Negative
NA	Term Loan	NA	8.95%	Jun-35	6.23	NA	Withdrawn