Rating Rationale
November 07, 2024 | Mumbai
Sunworld Solar Power Private Limited
Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.139.56 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
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 A/Stable’ rating on the long-term bank facilities of Sunworld Solar Power Pvt Ltd (SSPPL, part of the Renew group).

 

The rating continues to reflect the healthy revenue visibility, satisfactory operational track record and comfortable debt servicing metrics of SSPPL. The rating also factors in the managerial and financial support from the parent, ReNew Pvt Ltd (ReNew). These strengths are partially offset by exposure to counterparty risk and to risks inherent in the operations of renewable energy assets.

Analytical Approach

CRISIL Ratings has changed its analytical approach for the Renew group and its special purpose vehicles (SPVs). This is in line with the change in the group’s approach over the years for development, growth and overall ownership/management of the portfolio. The group has divested assets of over 1 GW over calendar years 2024 and 2023 and has entered into joint ventures and/or partnerships for several projects, including but not limited to 2 GW of assets. This is in line with the stated policy of asset recycling for return optimisation and raising capital, which is different from the earlier track record of continuous external capital raise and limited divestments. This would lead to varying or selective support to, and importance of, assets.

 

As a result, CRISIL Ratings will now evaluate the assets/SPVs on a standalone basis and their ratings will be notched up for the parent, ReNew. This is because the group is expected to provide need-based support to its assets, in line with articulation and past track record, and maintain free cash and unutilised working capital lines (across the group) for this purpose

Key Rating Drivers & Detailed Description

Strengths:

  • Managerial and financial support from the parent, ReNew: The Renew group has a robust market position, driven by size, diversity, vintage, and healthy revenue visibility of the asset portfolio. The group is one of the largest renewable energy players in India, with a portfolio of 15.6 GW (including capacity under construction and under development), including commissioned capacity of around 10.0 GW as of August 15, 2024, comprising 51% solar, 48% wind and 1% hydro projects. The group portfolio is also diversified in terms of location and counterparty, with assets in Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, Uttar Pradesh, Uttarakhand and Karnataka. The assets have strong revenue visibility, with most of the portfolio tied up through power purchase agreements (PPAs) of 25 years at pre-determined tariffs with over 15 state and central counterparties.

 

All the SPVs of the group are likely to receive strong managerial and financial support from ReNew (parent). This is line with the track record of financial support provided to several SPVs. The group is likely to maintain adequate liquidity to meet any exigency across the portfolio. Any change in the support philosophy will be a key rating sensitivity factor.

 

The financial flexibility of the Renew group is supported by the majority shareholder, Canada Pension Plan Investment Board (CPPIB; rated ‘AAA/Stable’ by S&P Global Ratings), which participates in discussions on business strategy, key operational matters, senior management, board evaluation and overall funding plans.

 

  • Revenue visibility provided by PPA and low offtake risk: SSPPL has signed a PPA for 25 years with Northern Power Distribution Company of Telangana Ltd (TSNPDCL), which minimises offtake risk and provides revenue visibility. The PPA has been signed at a tariff of Rs 5.59 per unit.

 

  • Satisfactory operational track record and comfortable debt protection metrics: The plant has a satisfactory operational track record, as reflected by plant load factor (PLF) of 21.3% and 21.8% for fiscals 2024 and 2023, respectively, along with receivables of around 70 days as on March 31, 2024. The fixed-tariff PPA with TSNPDCL should ensure adequate debt service coverage ratio (DSCR) over the tenure of the debt.

 

Weaknesses:

  • Exposure to risks inherent in operating renewable assets: Cash flows of solar power projects are sensitive to the PLF, which depends entirely on solar irradiance, which is inherently unpredictable. Achievement of PLF performance with respect to P90 projections will be monitored closely.

 

  • Exposure to counterparty risk: The long-term PPA with TSNPDCL for the entire project capacity exposes SSPPL to to risks related to the credit risk profile of a single counterparty and to any delay in payment. However, SSPPL has been receiving payments within three months of billing. Any stretch in the payment cycle will be a rating sensitivity factor.

Liquidity: Adequate

The project does not have any capital expenditure requirement. Debt service reserve account of one quarter of debt obligation is available to cater to any cash flow mismatches. Additional cash is also available, enhancing the liquidity.

Outlook: Stable

The project is expected to sustain its operational performance and benefit from financial support from the Renew group.

Rating sensitivity factors

Upward factors

  • Faster-than-expected deleveraging leading to improvement in expected debt service coverage ratio (DSCR) on P90 basis and sustained performance above P90 PLF
  • Improvement in the credit risk profile of ReNew

 

Downward factors

  • Delay in improvement in operating performance or reduction in receivables
  • Weakening in the credit risk profile of ReNew or change in shareholding or expected support from CPPIB or reduction in CPPIB shareholding from the current 53.6%

About the Company

SSSPL operates a 30 MW solar photovoltaic power plant in Jagatiyal district (Telangana). The project is operational and has stabilised with commercial operations date in November 2017. The entire capacity has been tied up through a 25 year PPA with TSNPDCL.

Key Financial Indicators (Standalone, CRISIL Ratings-adjusted numbers)

As on/for the period ended March 31

 

2024

2023

Revenue

Rs crore

35

32

Profit after tax (PAT)

Rs crore

11

7

PAT margin

%

32.9

21.9

Adjusted debt/adjusted networth

Times

2.1

2.8

Interest coverage

Times

2.5

2.0

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Term Loan NA NA 31-Mar-33 139.56 NA CRISIL A/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 139.56 CRISIL A/Stable   -- 09-10-23 CRISIL A/Stable 13-09-22 CRISIL A/Negative   -- --
      --   --   -- 13-05-22 CRISIL A/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan 139.56 REC Limited CRISIL A/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Criteria for rating solar power projects
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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