By Divya Charen C

India Ratings and Research (Ind-Ra) has taken following rating actions on Green Infra Wind Energy Limited’s (GIWEL) debt facilities:

Instrument Type

Date of Issuance

Coupon Rate (%)

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Term loan

-

-

31 December 2030

INR8,130

IND A+/Stable

Affirmed

Letter of credit facility

-

-

-

INR2,500

IND A+/Stable

Affirmed

Term loan*

-

-

31 March 2034

INR2,272

Provisional IND A+/Stable

Assigned

Term loan (bridge facility)

-

-

-

INR2,000

IND A+/Stable/IND A1

Assigned

Working capital facility

-

-

-

INR500

IND A+/Stable

Assigned

Proposed working capital facility*

-

-

-

INR250

Provisional IND A+/Stable

Assigned

*The final rating for the proposed term loan facility is subject to the receipt of executed financing documents (including facility agreement, trust and retention agreement, no dues certificate from short-term lenders) in conformance to the information already received. 

The rating affirmation is anchored by
GIWEL’s plant load factor (PLF) being in line with Ind-Ra’s expectation and the reasonable flexibility available to manage the high debtor days originated from Maharashtra State Electricity Distribution Company Limited’s (MSEDCL) payment delays. That being said, the increase in debtor days to 220 on 31 December 2016 from 133 on 31 March 2016 adds to liquidity stress. GIWEL has managed debt servicing through revenue and internal accruals. In FY17, GIWEL tied up working capital of INR500 million and will tie up another INR250 million. Working capital utilisation is low and sporadic receipts from MSEDCL are aiding the cash flows. A debt service reserve for three months is in place and has not been tapped into.

KEY RATING DRIVERS

Operating Performance: Diversified wind assets locations provide some comfort over the intrinsic unreliability of wind resource, as wind resource variation across states are generally not correlated. The average PLF for plants in Dhule, Bharmasagar, Telagi and Bhud are in line with Ind-Ra’s projections. The slight fall in PLFs in FY16 is attributed to the natural wind resource variance as the average grid and machine availability remained above 97%. PLF for Rojwas was slightly lower than expected, because of a fall in machine availability, which has been resolved. Wind resource assessments carried out for the new capacity in Gujarat provide some comfort on the revenue projection. 

Completion Risk:
  46MW of capacity under development is awaiting confirmation on commissioning. GIWEL commissioned 60MW in Rojwas in Madhya Pradesh in March 2016. GIWEL plans to increase the capacity year on year. Ind-Ra draws comfort from the sizeable operating capacity in GIWEL and the group’s experience in developing and operating 927.1MW. Moreover, the recent wind reverse auction provides visibility on power tie-ups. Green Infra Renewable Energy Limited, GIWEL’s subsidiary, has won 249.9MW of wind capacity in the reverse bidding at a tariff of INR3.46/kWh. Management indicates that equity infusions for new capacities will be from the sponsor, Sembcorp Green Infra Limited (SGIL), or from internal accrual. GIWEL has not provided guarantees to its subsidiary or group companies and any guarantees issued will be assessed for the impact on the rating.  

Sponsors:
 SGIL was incorporated in April 2008 and owns around 927.1MW of wind and solar projects as of March 2017. SGIL is owned by SembCorp Utilities Pte Limited (70.38%) and IDFC Private Equity Fund III (29.62%). Sembcorp Utilities has a strong presence in Asia and is one of the leading global energy, water and marine groups operating across six continents. Experience of the major sponsor in developing and operating renewable projects, and ownership by a large international infrastructure company are rating positives. The rating factors in GIWEL’s strong financial and operational links with the sponsor and the sponsor’s established expertise in operating power plants internationally. Ind-Ra expects the sponsor to support the project in the event of any crisis. 

Off-take & Revenue Risks:
 Long-term power purchase agreements (PPAs) are in place for the entire operational capacity at fixed tariffs, mitigating off-take risk. Also, debt service coverage is comfortable despite assuming a competitive tariff after the expiry of PPAs.

Counterparty Risk:
 The rating is constrained by the weak financial profiles and long payment cycles of the counterparties especially MSEDCL and Madhya Pradesh Power Management Company Limited (MPPMCL). Timely payments from Bangalore Electricity Supply Company and Gujarat Urja Vikas Nigam Limited provide some certainty to cash flows of the company. Furthermore, working capital facility of INR750 million will be sufficient to meet the six-month-long payment cycle of MSEDCL and MPPMCL.

Operational Risk:
 GIWEL has signed fixed-price, fixed-escalation contracts with established equipment suppliers for operation and maintenance. The contracts include an availability guarantee for 95% and penalties associated with not achieving the same. Given the experience of these contractors in the wind sector and track record of healthy machine availability, the operational risk is mitigated. 

Debt Structure:
 The entire debt of INR8,130 million amortises in 60 unequal quarterly payments ending in December 2030. The rating considers the presence of a debt service reserve equivalent to one quarter of debt service, and the standard cash flow waterfall mechanism. The proposed term loan of INR2,272 million for funding 46MW will be under separate financing documents and waterfall mechanism. The rated letter of credit facility and short-term loan (bridge facility) availed by the company to incur capex for the capacity under construction has a 12-month tenor and any utilisation is to be redeemed using the term loan. The covenant of debt to equity ratio of 3.5x limits the overall debt outstanding at any point of time.


RATING SENSITIVITIES

A lower-than-expected PLF, any significant payments delays from the off-takers and absence of sponsor support in the event of cash flow stress could result in a rating downgrade.


COMPANY PROFILE

GIWEL owns 248.9MW of wind assets, spread across Karnataka, Maharashtra, Madhya Pradesh and Gujarat. Wind assets under GIWEL are Dhule (40MW commissioned in FY08) and Bhud (43.5MW commissioned in FY14) in Maharashtra; Bharmasagar (36.3MW commissioned in FY09) and Telagi (23.1MW commissioned in FY09) in Karnataka; Rojwas (60MW commissioned by March 2016) in Madhya Pradesh; and Rojmal (22MW) and Sadla (24MW) in Gujarat. Commissioning certificates are awaited for 46MW in Gujarat. 

PAs for the capacities in Dhule and Bhud have been signed with MSEDCL for the 13 years until September 2020 and March 2027, respectively. PPAs for the capacities in Bharmasagar and Telagi have been signed for 20 years with 
Bangalore Electricity Supply Company, which are valid until October 2028 and February 2029, respectively. PPA for 60MW in Rojwas has been signed for 25 years (valid till FY41) with MPPMCL. PPA for 46MW in Gujarat has been signed with Gujarat Urja Vikas Nigam for of 25 years.

Revenue and EBITDA for 9MFY17 were INR1,811 million (FY16: INR1,435 million) and INR1,522 million (INR1,290 million), respectively.


RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Rated Amount (million)

Rating

21 March 2016

Term loan

Long-term

INR10,402

IND A+/Stable

IND A+/Stable

Bank facilities

Long-term

INR3,250

IND A+/Stable

IND A+/Stable

Term loan (bridge facility)

Long-term/Short-term

INR2,000

IND A+/Stable/IND A1

-


COMPLEXITY LEVEL OF INSTRUMENTS

Bank facilities are instruments with low complexity levels, where the relationship between inherent risk factors and intrinsic return characteristics is straightforward. 

For more information, visit
https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

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Analyst Names

  • Primary Analyst

    Divya Charen C

    Senior Analyst
    India Ratings and Research Pvt Ltd 4th Floor, D South, TIDEL Park No 4, Rajiv Gandhi Salai, Taramani Chennai 600 113
    +91 44 43401710

    Committee Chairperson

    Dr. Sunil Kumar Sinha

    Principal Economist and Director Public Finance
    +91 11 43567255

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121