| Walwhan Wind RJ Limited | ||||||
| Ratings 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 AA/Stable/CRISIL A1+’ ratings on the bank facilities of Walwhan Wind RJ Limited (WWRL). CRISIL Ratings has withdrawn its rating on Rs 23.95 crore of the long-term bank facilities of WWRL on receipt of relevant documents from the bankers. This is in line with the CRISIL Ratings policy on withdrawal of bank loan ratings.
WWRL is a special-purpose vehicle (SPV) and a step-down subsidiary of Tata Power Renewable Energy Ltd (TPREL; ‘CRISIL AA/Stable/CRISIL A1+’), held through Walwhan Renewable Energy Ltd (WREL; ‘CRISIL AA/Stable’). TPREL is a holding-cum-operating company of all the renewable businesses of Tata Power Company Ltd (TPCL; rated ‘CRISIL AA/Stable/CRISIL A1+’), including engineering, procurement and construction (EPC); via 100% holding in Tata Power Solar System Ltd (TPSSL; rated ‘CRISIL AA/Stable/CRISIL A1+’). TPREL also houses the electric vehicles, solar cell and module manufacturing (4 GW facility in TP Solar Ltd; rated ‘CRISIL AA/Stable/CRISIL A1+’) and the renewable generation businesses.
The renewable generation group, which includes assets housed under TPREL or its subsidiaries, namely Walwhan Renewable Energy Ltd (WREL; wholly owned subsidiary of TPREL), CSL, TP Kirnali and all other SPVs, are collectively referred to herein as the renewable generation homogenous group under TPREL. TPCL is the ultimate parent of the TPREL group.
The ratings factor in the operational track record of the operational portfolio (wind portfolio of around 0.9 GW and solar portfolio of ~2.9 GW) under the renewable generation business, the healthy internal cash generation translating into comfortable consolidated average debt service coverage ratio (DSCR), and liquidity of around six months of debt servicing, These strengths are partially offset by exposure to risks posed by receivables, implementation of new capacities (around 2 GW) and those inherent in wind and solar-powered renewable assets.
The ratings continue to factor in the strategic importance to, and strong financial and managerial support from, the parent, TPREL.
Further, CRISIL Ratings notes the announcement made by TPREL, in January 2023, related to the proposed merger of its various subsidiaries/SPVs with itself, including certain renewable generation entities (including WREL) and TPSSL (including CSL). The board has granted the approval for the proposed merger and other requisite approvals are being awaited. CRISIL Ratings understands that completion of the proposed merger could take more than 12 months and hence, developments on this front will be monitored. |
Analytical Approach To arrive at the rating of the renewable generation homogenous group under TPREL (the group), CRISIL Ratings has combined the business and financial risk profiles of TPREL, WREL and its subsidiaries, all their SPVs, renewable assets transferred from TPCL (standalone) and renewable assets in TPSSL, collectively referred to as the renewable generation homogenous group under TPREL. This is in line with the criteria for rating entities in homogenous groups.
The group houses all wind and solar renewable power assets of TPCL. All the entities are engaged in the same business and have common management and treasury. Post-debt servicing, excess cash flow would be available for covering any shortfall across the group. Moreover, liquidity is maintained at TPREL and WREL in the form of working capital limit and cash. TPREL has demonstrated a track record of supporting WREL and its SPVs.
After arriving at the ratings of the group, CRISIL Ratings has applied its parent notch-up framework to factor in the extent of distress support expected from TPREL. The support factors in the strategic importance of the group to TPREL and the strong financial and managerial support provided by the latter.
Furthermore, the credit rating of DMSPL is equated with that of the group, given the strong overall financial risk profile.
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: Strategic importance to, and strong financial and managerial support from, the parent The capital employed in the group is more than fourth-fifth of the overall capital employed in TPREL, indicating increasing importance of the renewable generation business to the parent. Further, the ultimate parent, TPCL aims to achieve a portfolio of over 20 GW of renewable assets over the next five years. The company plans to derive 50-60% of its generation capacity from non-fossil fuel assets over the next 7-8 years, which further increases the overall importance of the group. The renewables portfolio provides strong economic incentive and helps diversify risk at the portfolio level.
Operational capacity of the group was around 4 GW (forming nearly 34% of generation capacity of TPCL) as of December 2022. Given its strategic importance and strong economic incentive, the group will remain critical for the parent.
Well-diversified portfolio in terms of geography and maturity The group is one of the largest players in the Indian renewable energy space, with around 4 GW of installed capacity, including around 2 GW under-construction projects. It has a diversified portfolio of solar-wind power capacity in the ratio of 76:24 spread across 15 states. This helps mitigate the risk of resource and location-specific generation variability. The operational portfolio is fairly mature, with nearly 65% of the assets having a track record of more than three years, and around 90% having been operational for over a year. The projects primarily have tier-I vendors, ensuring quality equipment to mitigate technology risk. The well-diversified portfolio with pan-India coverage and established operational track record will continue to support the credit risk profile.
Healthy revenue visibility and low offtake risk combined with robust DSCR Currently, the group accounts for nearly 35% of TPREL’s consolidated revenue and more than 80% of the EBIDTA. Around 98% of the operational portfolio of the renewable generation business has power purchase agreements (PPAs) spread over a tenure of 25 years, while the remaining has PPAs for a tenure ranging from 13 to 15 years. Furthermore, the weighted average tariff of the portfolio is around Rs 4 per kilowatt-hour (kWh), leading to healthy overall returns. This lends high predictability and stability to revenue with low demand risk. Consolidated average DSCR for the portfolio should remain robust.
Weakness: Exposure to moderate receivables risk, mitigated by diversity in counterparties Long-term PPAs with distribution companies (discoms) having weak financial risk profiles and payment track record pose receivables risk. Consolidated receivables were around six months as on March 31, 2023, similar to levels as on March 31, 2022, but should improve post the Late Payment Surcharge or LPS scheme. As on March 31, 2023, receivables from discoms such as Tamil Nadu and Andhra Pradesh were outstanding for more than six months. The weak financial health of state discoms could lead to further delay in payments and thus, continue to constrain the credit risk profile of the group. This risk is mitigated by diversity in counterparties, with over 15 discoms, and liquid surplus of around six months of debt obligation maintained at the group level. The company resorts to bill discounting to ensure faster realisations. It has also started receiving past dues in instalments owing to the equated monthly instalment or EMI scheme introduced by Ministry of Power under LPS Rules, 2022*.
*The Ministry of Power, Government of India has issued Electricity, (Late Payment Surcharge [LPS} and Related Matters) Rules, 2022 (LPS Rules 2022) to address the rising dues of state power utilities, under which outstanding dues as on June 3, 2022, will be paid in 48 equal monthly installments, commencing from August 2022.
Exposure to risks inherent in operating renewable assets Cash flow of wind power projects is sensitive to plant load factor (PLF), which is entirely dependent on wind patterns that are inherently unpredictable. Several assets in the group’s wind portfolio have been underperforming the P90 historically, but the company has been looking to increase the PLF by improving operations and maintenance, and machine availability. Also, in case of a solar power plant, generation depends on irradiation levels around a plant’s location and annual degradation of solar panels, which may increase exponentially in the later part of the life of an asset. Though geographical diversity mitigates the risk related to generation, exposure to inherent operational risk pertaining to renewable power assets constrains the rating.
Susceptibility to implementation risk owing to growth plans through organic or inorganic route The group remains exposed to project risk with nearly 2GW of capacity under construction. Nonetheless, strong track record of execution and calibrated expansion strategy with a prudent funding mix mitigate the risks. The group is expected to commit substantial funds to a renewable project only if there is a strong visibility on evacuation and PPA. |
Liquidity: Strong Cash and cash equivalents for TPREL were around Rs 3,080 crore as on March 31, 2023, while undrawn fund-based limit was around Rs 234 crore as on April 30, 2023. Cash accrual of over Rs 1,300 crore is expected per fiscal 2024. Any shortfall is expected to be met through refinancing or need-based support from the parent. Capital expenditure (capex) of around Rs 7,000 crore, planned over fiscal 2024, towards commissioning of nearly 2 GW capacity, will be funded through a mix of debt and internal accrual. |
Outlook: Stable The outlook is based on the CRISIL Ratings outlook on the bank facilities of TPREL. Any change in the ratings or rating outlook on TPREL will lead to a corresponding change in the overall rating or outlook of the group.
CRISIL Ratings believes the group will benefit from its strategic importance to TPREL, given its ability to generate substantial cash accrual, supported by a healthy weighted average tariff and P90 PLFs. Also, the diversified portfolio will continue to support the credit risk profile. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company WWRL is an SPV and stepdown subsidiary of TPREL held through WREL. WWRL has a 126-MW wind power plant in Rajasthan that was set up at a cost of Rs 840 crore and commissioned in August 2015. WWRL has entered into a 25-year PPA with Jaipur Vidyut Vitran Nigam Ltd and Jodhpur Vidyut Vitran Nigam Ltd ensuring offtake of the entire power generated at an average tariff of Rs 6 per kWh. |
About the Group The renewable generation homogenous group under TPREL, has an operating capacity of 3.9 GW, as of December 2022. The consolidated capacity of the group comprises around 0.9 GW wind and nearly 2.9 GW solar capacity across 12 states. TPREL also has around 2 GW of capacities under construction. |
Key Financial Indicators* (WWRL)
*As per company’s financials |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Bill discounting; includes sublimit of Rs 1 crore of overdraft facility |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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