| Sapphire Industrial Infrastructures Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 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 AAA/Stable’ rating on the long-term bank facility of Sapphire Industrial Infrastructures Private Limited (Sapphire Industrial; part of the 18 solar power special-purpose vehicles [SPVs] of Macquarie Asia Infrastructure Fund, referred to as the Macquarie Solar SPVs).
The rating continues to reflect strong revenue visibility for the SPVs, backed by long-term power purchase agreements (PPAs) and low sales risk, healthy financial risk profile and adequate liquidity, and improved operational track record in fiscals 2023 and 2024. These strengths are partially offset by susceptibility to volatility in rate of interest and risks inherent in operating solar energy assets. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of 18 Macquarie Solar SPVs, in line with its criteria for rating entities in homogeneous groups. The rating of each SPV has been equated to that of the group. The SPVs are Precious Energy Services Pvt Ltd (Precious), Solitaire Energies Ltd (Solitaire Energies), Porbandar Solar Power Ltd (Porbandar), Ganges Green Energy Pvt Ltd (Ganges), Ganeshvani Merchandise Pvt Ltd (Ganeshvani), CBC Solar Technologies Pvt Ltd (CBC), Sapphire Industrial Infrastructures Pvt Ltd (Sapphire), Aftaab Solar Private Ltd (Aftaab), Solitaire Industrial Infrastructure Pvt Ltd (Solitaire Industrial), Deligentia Energy and Infrastructures Pvt Ltd (Deligentia), Bhanuenergy Industrial Development Ltd (Bhanuenergy Industrial), Bhanuenergy Infrastructure and Power Ltd (Bhanuenergy Infrastructure), Hiraco Renewable Energy Pvt Ltd (Hiraco), Kindle Engineering and Construction Pvt Ltd (Kindle), Chattel Constructions Pvt Ltd (Chattel), Responsive Sutip Ltd (Responsive), Sand Land Real Estate Pvt Ltd (Sand Land) and Ujjawala Power Pvt Ltd (Ujjawala). (A list of the 18 entities is also provided under Annexure.) These entities operate solar power assets, have common management and treasury, and are critical to the group. Each SPV acts as a co-obligor to the other. Post debt servicing in each SPV, excess cash flow is largely available for use across the group. Any change in this understanding remains a key rating sensitivity factor.
Additionally, all 18 SPVs have legally binding cross-guarantees which make them co-obligors for debt obligation.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong revenue visibility and low sales risk Having aggregate capacity of 298 MW, the group has 25-year PPAs with Gujarat Urja Vikas Nigam Ltd (GUVNL), Torrent Power Ltd, NTPC Vidyut Vyapar Nigam Ltd (NVVN), Durgapur Projects Ltd (DPL) (merged with West Bengal State Electricity Distribution Company Ltd with effect from January 1, 2019), Madhya Pradesh Power Management Company Ltd (MPPMCL) and Punjab State Power Corporation Ltd (PSPCL). The group supplies power at fixed tariff of Rs 3.96 per kilowatt-hour (kWh) to Rs 15.0/kWh under the respective PPAs. The SPVs have an average operational track record of over nine years. Also, 88% of the dues are received from counterparties within a month from the date of invoice. This lowers demand risk and enhances revenue visibility.
Healthy financial risk profile and adequate liquidity The Macquarie Solar SPVs are expected to report healthy average consolidated debt service coverage ratio (DSCR) at P-90 plant load factor (PLF) over the remaining debt tenure. The group has additional credit enhancers such as inverter replacement reserve, which is maintained for 10 years after commencement of commercial operations; an operations and maintenance (O&M) reserve account covering three months of expenses; and a cash sweep option available from fiscal 2026 (wherein lenders will have the right to sweep more than 30% surplus cash flow for prepayment of debt in the inverse order of maturity).
Moreover, the group maintains adequate liquidity for debt servicing during adverse conditions, as part of the transaction with blended liquidity of six months. This will be in the form of one quarter debt service reserve account (DSRA) for all projects and two quarters for projects with a weaker counterparty; O&M reserve equivalent to three months of budgeted expenses as per base case sanctioned; and inverter replacement reserve of around one month of debt servicing at peak level.
Improved operational track record The SPVs have shown sustained improvement in operational performance in fiscals 2023 and 2024 on the back of several performance improvement initiatives undertaken from surplus cash flow in the past three fiscals. As a result, generation for the group improved to 17.3% and 16.4% in fiscal 2023 and fiscal 2024, respectively. This performance was better than the P90 estimate of 16.20% (fiscal 2023) and consistent with the performance in fiscals 2021 and 2022. The operational performance will remain stronger than P90 levels over the medium term.
Weaknesses: Exposure to fluctuations in interest The group had debt of Rs 1,133 crore as on March 31, 2024, which is repayable over 15 years until March 2032 (for majority of the SPVs). As 78% of the debt is exposed to revision in interest rate in Fiscal 2025, debt service cushions remain exposed to changes in interest rate over the loan tenure, given that cash flows are linked to fixed tariffs in PPAs. Higher-than-expected increase in interest cost will be a rating sensitivity factor.
Susceptibility to climate changes and technology risk Generation of solar power depends on favourable climatic conditions and remains vulnerable to inherent risks associated with solar radiation in the long term. Although generation levels in fiscal 2024 were better than P90 levels, they were lower than generation levels in fiscal 2023 (17.4%) owing to decreased irradiance in the catchment area of Gujarat. Variation in solar intensity or irradiation could reduce the operating PLF and cash flows. |
Liquidity: Superior Liquidity will remain robust driven by expected cash inflow of Rs 262 crore and Rs 231 crore in fiscal 2025 and 2026, respectively, and DSRA equivalent to six months of debt obligation of Rs 100 crore as of March 2024. Debt obligation (towards interest and principal) is expected over Rs 199 crore and Rs 176 crore in fiscal 2025 and 2026, respectively. The SPVs have maintained the inverter and O&M reserves as per the financing agreements. |
Outlook: Stable The credit risk profiles of the Macquarie Solar SPVs will continue to benefit from stable cash flows backed by long-term PPAs and improved operational performance. |
Rating Sensitivity Factors Downward Factors
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Unsupported rating: ‘CRISIL AAA’ Unsupported rating disclosure for ratings without the suffix CE wherein the instruments are backed by specified support considerations is in compliance with the Securities and Exchange Board of India circular dated September 22, 2022. |
Key drivers for unsupported ratings CRISIL Ratings has combined the business and financial risk profiles of all SPVs under the Macquarie Solar SPVs and has equated their ratings with that of the group. This is driven by expected high fungibility of cash flow across all SPVs and timely support to all SPVs in case of distress or for debt servicing. The management’s intention to have high fungibility is supported by cross-guarantees across the SPVs, presence of TRA waterfall mechanism, mandatory cash sweeps/ traps, cross default clauses and other financial covenants. Consequently, unsupported and supported ratings, with the cross-guarantees, stand at the same level and are equated to that of the group. |
About the Company Sapphire operates a 5 MW solar photo voltaic (PV) power plant at Sivaganga, Tamil Nadu. The plant became operational in December 2010.
In 2017 and early 2018, Macquarie Asia Infrastructure fund acquired the shareholding, of Hindustan Power’s 251 MW solar power plant in Gujarat, Tamil Nadu, West Bengal, Madhya Pradesh, Punjab and Odisha, for an undisclosed consideration.
The Macquarie Solar SPVs include Precious, Solitaire Energies, Porbandar, Ganges, Ganeshvani, CBC, Sapphire, Aftaab, Solitaire Industrial, Deligentia, Bhanuenergy Industrial, Bhanuenergy Infrastructure, Hiraco, Kindle and Chattel. |
About Macquarie Asia Infrastructure Fund Macquarie Asia Infrastructure Fund is a 10-year closed end fund targeting infrastructure investments in Greater China, India, Korea, Japan, Australia, New Zealand, and investment grade Southeast Asia. |
Key Financial Indicators - (Consolidated 18 SPVs; CRISIL Ratings adjusted numbers)
Key clauses of guarantee deed-
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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Criteria Details
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