| Amplus Power Solutions Private Limited | ||||
| Rating upgraded to 'CRISIL AA+ / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale
The rating upgrade factors in healthy operational performance of the solar plant with plant load factors (PLFs) consistently above P-90 levels and resultant improvement in the liquidity position of the company. The rating continues to factor in strong managerial and financial support likely to be received from the ultimate parent, Petroliam Nasional Berhad, Malaysia (PETRONAS; foreign currency rating of 'A-/Negative' and local currency rating of A/Negative by S&P Global Ratings); low offtake and counterparty credit risk, with entire capacity tied-up with commercial and industrial (C&I) consumers having healthy credit risk profiles; and healthy financial risk profile, driven by comfortable debt service coverage ratio (DSCR).
These strengths are partially offset by exposure to single asset concentration risk and technological risk associated with solar plants, and dependence on favourable solar irradiation for power generation. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of APSPL and used its criteria for rating solar power projects. Further, CRISIL Ratings has applied its parent notch-up framework to factor in the support available to APSPL from the ultimate parent, PETRONAS.
Treatment of non-convertible debentures (NCDs) from the parent, Amplus Energy Solutions Pte Ltd (AESPL; 100% subsidiary of PETRONAS): CRISIL Ratings has not factored in payment of interest and principal repayment or redemptions in the DSCR calculations in line with the earlier approach, as these are subordinate to bank debt. These instruments carry a rate of interest of around 14% and any redemption or interest payment shall be post meeting restrictive covenants and with lender approval. |
Key Rating Drivers & Detailed Description Strengths: Strong financial, operational and managerial support from the ultimate parent The company receives strong operational and managerial support from the PETRONAS group. In case of exigencies, the company will receive need-based financial support from its ultimate parent for timely servicing of debt. The propensity to support is high given the strategic focus of the group towards renewable energy, budgeted capital outlay plans and economic incentive, as reflected in healthy DSCRs over the tenure of the loan.
Healthy operational track record of the project APSPL's 43.5-megawatt peak (MWp) power project has been operational for more than four years with average PLFs consistently above P-90 generation levels over this period. PLF stood at 17.9% and 18.5% in 2020 and 2021, respectively (falling because of extended rainfall in the project area while generation remained above P-90 level). The plant should continue to operate at P-90 level given the healthy operational track record, resulting in stable revenue. However, operational performance and fluctuations in PLF will remain key monitorables.
Low offtake and counterparty credit risks APSPL has entered into power purchase agreements (PPAs) with seven off-takers, having tenure of 10-25 years, at competitive tariff of Rs 4.9 per unit, which is at a discount of around Rs 2 per unit to the grid tariff rates of state distribution companies. This mitigates demand risk to a significant extent.
The counterparties include C&I customers with healthy credit risk profiles such as ABB India Ltd ('CRISIL AAA/Stable/CRISIL A1+'), Honda Motorcycle and Scooter India Pvt Ltd, Reckitt Benckiser India Pvt Ltd, IFB Industries Ltd ('CRISIL AA-/Stable '), Takshashila Healthcare and Research Service Pvt Ltd, Denso Kirloskar Industries Pvt Ltd and Sobha Ltd. Thus, counterparty risk is low, which is also evident from the fact that most of the payments are received in 30 days, on an average, from the billing date. Moreover, the long tenure of debt (around 10 years) coupled with expectation of generation at P-90 levels results in comfortable DSCR of 1.4 times.
Competitive tariff supported by favourable state solar policy The tariff for a PPA is primarily fixed with annual escalations. In some cases, tariff is linked to grid tariff. The state solar policy in Karnataka is favourable as transmission charges and losses, wheeling charges and losses, banking charges and cross-subsidy surcharge are exempt for 10 years for solar projects, based on third-party sale, commissioned before March 31, 2018. However, any sharp downward revision in the grid tariff or adverse regulatory actions may reduce the attractiveness of the project to counterparties, constraining the cushion in debt servicing.
Weaknesses: Technological risks associated with solar power plants and dependence on favourable solar irradiation for power generation Solar power generation depends on irradiation levels around the plant's location. Also, changes in the average temperature or performance of solar modules may affect the company's power generation and lead to higher-than-expected degradation in solar panels. Given that cash flow of a solar power project is highly sensitive to variation in PLF, these factors could impair the debt servicing capability of solar projects.
Concentration risks on account of single asset operations The company`s generating assets consist of a single 43.5 MWp plant located in Karnataka exposing the company to location concentration risk. However, the risk is managed by maintaining sufficient liquidity through debt service reserve account (DSRA) of about six months of debt servicing.
Susceptibility to regulatory changes The project is susceptible to any policy change on open access in Karnataka. For instance, Karnataka Electricity Regulatory Commission (KERC) issued an order on May 14, 2018, to increase the wheeling and banking charges on renewable power projects in Karnataka. The High Court of Karnataka issued a stay order on this and subsequently quashed the order in March 2019. The project will remain exposed to implementation of additional surcharges approved by KERC. Consequently, the company’s ability to pass on these charges to off-takers remains critical from a credit perspective. |
Liquidity: Strong Cash accrual (available for debt servicing) is expected to be around Rs 27 crore each in 2022 and 2023, against debt obligation of Rs 21-22 crore. Furthermore, as on February 28, 2022, cash and equivalent were healthy at around Rs 36.7 crore, including DSRA equivalent to two quarters of debt servicing (Rs 11 crore). CRISIL Ratings understands that a part of this liquidity will be repatriated to the parent, post receiving lender approvals. The company does not have any working capital limit. Healthy accrual, financial flexibility of the PETRONAS group and DSRA of two quarters will ensure adequate liquidity to withstand any delay in payment from off-takers or any variation in PLF levels. |
Outlook Stable APSPL will continue to generate healthy cash accrual, backed by long-term PPAs and healthy PLFs. Furthermore, it will remain strategically important to PETRONAS and receive strong managerial, operational and financial support from its ultimate parent PETRONAS. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company APSPL is a wholly owned subsidiary of AESPL (100% subsidiary of PETRONAS). Incorporated on January 5, 2016, it operates a 43.5-MWp ground-mounted solar power plant (including 0.9 MWp operationalized in October 2021) in Chittradurga, Karnataka. The project has been set up in a solar park, which is developed by Sagitaur Ventures India Pvt Ltd. It has entered 10–25-year PPAs with seven C&I customers. |
Key Financial Indicators
*Includes NCDs from the parent AESPL ^company changed accounting year to December ending. Numbers for December 31, 2020, are for nine months and are not comparable with previous year |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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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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This Annexure has been updated on 31-Mar-2022 in line with the lender-wise facility details as on 27-Aug-2021 received from the rated entity.
Criteria Details
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