Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AAA/Stable' rating to the long-term bank facility and Rs 700 crore non-convertible debentures (NCDs) of Anzen India Energy Yield Plus Trust (Anzen InvIT) and has reaffirmed its ‘Crisil AAA/Stable’ rating on NCDs of Rs 750 crore.

 

The additional debt will be largely used to fund the acquisition of 100% shareholding of ReNew Sun Waves Private Ltd (RSWPL). RSWPL operates a 300MW alternating current (~420 MW direct current [DC]) solar plant in Jaisalmer, Rajasthan and has a power purchase agreement (PPA) with Solar Energy Corporation of India Ltd (SECI) as the counterparty at a tariff of Rs 2.55/unit. RSWPL has a satisfactory operating track record of ~ 3 years. The remaining life of the PPA is ~22 years. The enterprise value determined under the agreement is Rs 1496 cr subject to net current assets and other such adjustments as provided in the definitive documents. Additionally, ~Rs 143 crore is expected to be paid as an earn-out on account of change in law proceeds pertaining to increase in basic customs duty (BCD), safeguard duty (SGD) and goods and service tax (GST), after the first payment is realised by RSWPL. The trust expects to fund the transaction through a mix of debt and equity. It has also announced equity raising plans of upto ~Rs 1,400 crore through additional unit issuance in the near term. 

 

With assets under management (AUM) of both existing transmission assets valued at Rs 23 billion as on March 31, 2024, the net debt to AUM ratio at present is at ~28%, well within the 49% stipulated by Securities and Exchange Board of India (SEBI). With acquisition of RSWPL, the net debt to AUM ratio is expected to increase, however it shall remain within the cap.

 

The ratings continue to reflect the stable revenue profile of Anzen InvIT, with the underlying transmission special purpose vehicles (SPVs) under the point of connection (PoC) mechanism and the proposed entity, and RSWPL, having a long-term offtake agreement [22 years as remaining life and fixed tariff] with SECI as the counterparty. Additionally, the transmission SPVs have a healthy track record of maintaining line availability (Darbhanga Motihari Transmission Co Ltd [DMTCL], 99.96% and NRSS XXXI (B) Transmission Ltd [NRSS], 99.83% in fiscal 2024; 99.96% and 99.98%, respectively, in fiscal 2023) at higher-than-normative levels over the past six fiscals, which is expected to continue over the remaining concession period of ~28 years of the transmission service agreements (TSAs). RSWPL also reported healthy plant load factor (PLF; AC) was 28.0% in fiscal 2024 and 28.40% in fiscal 2023. This will ensure steady cash flow over the debt tenure for Anzen InvIT with healthy debt service coverage ratio (DSCR) and adequate debt service reserve account (DSRA), resulting in a strong financial risk profile.

 

 The Trust has executed a right of first offer (ROFO) agreement with Infrastructure Yield Plus II on December 19, 2024 with respect to 100% holding in Kudgi Transmission Ltd (rated ‘crisil AAA/ Stable’), the SPV owning a transmission line of ~980 ckt km in Karnataka.

 

The InvIT also has a ROFO for the stake of Edelweiss Infrastructure Yield Plus Fund (EIYP)/SEPL Energy Pvt Ltd (SEPL) in 12 operational solar assets. The solar assets are spread across India and have a combined capacity of around 813 MW (DC). The final details of the acquisition and its impact on the credit risk profile of Anzen InvIT will be monitorable.

 

Anzen InvIT plans to add further renewable and transmission assets to the InvIT in the near- to medium term. Given transmission and renewables sectors have different risk profiles, Crisil Ratings will continue to closely monitor further diversification and its impact on the credit profile of the InvIT.

 

The strengths are partially offset by exposure to operations and maintenance (O&M) risk for the underlying transmission assets and impact of the proposed acquisition of the solar assets.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Anzen InvIT and its SPVs as the former has direct control over the SPVs and will support them during exigencies. Furthermore, the SPVs will have to mandatorily dispense 90% of their net distributable cash flow (after meeting their debt obligation) to the InvIT, leading to highly fungible cash flow.

 

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:

• Stable revenue of underlying operational assets: The two underlying SPVs have a track record of above-normative transmission line availability of around six years. Their TSAs ensure payment of stipulated tariff subject to achievement of normative line availability of 98%.

The revenue of a transmission SPV is completely delinked from the power demand-supply situation and volatility in electricity prices. Moreover, factors affecting line availability—such as unchecked vegetation growth, lightning or high ambient temperature causing wear and tear of insulators and flashovers—are routine. These events do not entail significant cost and can be easily rectified, thus minimising outage time. Any outage on account of extreme weather conditions, cyclones or excessive lightning is usually classified as an Act of God and is covered under the force majeure clause of the TSA. Hence, such an outage has no impact on the line availability.

 

Post acquisition, the solar SPV will contribute to 40-45% of the revenue which will remain dependent on radiation levels. The generation remains susceptible to variability in climatic conditions and risks pertaining to equipment. However, the project is backed by long term PPA and healthy operational performance which will likely support the revenue profile.

 

• Cash flow stability under the PoC pool mechanism: The SPVs are interstate transmission system (ISTS) licensees and come under the PoC pool mechanism, wherein the central transmission utility (CTU) collects monthly transmission charges from all designated ISTS customers on behalf of the licensees. All ISTS licensees are then paid their share of the transmission charges from the centrally collected pool. This method mitigates counterparty risk as the risk of default or delay in payment from a customer is proportionately distributed among all ISTS licensees. Though most customers (power distribution companies) are weak counterparties, the CTU has maintained strong collection efficiency. The SPVs will continue to benefit from the strong collection efficiency of the CTU and diversification of the counterparty risk under the PoC pool mechanism.

 

The solar asset to be acquired has been operational for around three years and has a track record of healthy collection efficiency. On an average bill payments are being received in a period of less than 15 days.

 

• Expectation of a strong financial risk profile: The trust has a stable cash flow aided by the long-term TSAs of its underlying SPVs and the sound collection efficiency under the PoC mechanism. The listing proceeds were utilised to repay the external debt in the SPVs and the trust raised external debt to refinance the debt in the SPVs and accrues interest on the same.

 

The external debt has large bullet payments over the next 3-5 years; however, the long life of underlying assets is expected to support refinancing at favourable terms, as indicated by the strong project life cycle ratio. Acquisitions, including the ROFO assets by Anzen InvIT, and their impact on the financial risk profile of the InvIT, will be key monitorables.

 

Weakness:

• Exposure to O&M risks for SPVs: Maintenance of high line availability is critical to ensure stability of revenue in the power transmission sector. Although the O&M expense forms a small portion of revenue, improper line maintenance may lead to revenue loss and weaken the loan repayment capability of the SPVs. Similarly, timely O&M for solar assets is critical for healthy generation. However, these risks are mitigated by low technical complexity and O&M being a routine activity.

Liquidity: Superior

Stable revenue and strong cash accrual will ensure a healthy DSCR over the debt tenure and comfortably cover the debt obligation over the medium term. Moreover, the long life of underlying assets, exceeding the debt tenure, should help in refinancing the bullet repayment at favourable terms. Maintenance of a three-month DSRA supports liquidity.

Outlook: Stable

Crisil Ratings believes Anzen InvIT will generate stable cash flow, backed by the ability of its transmission assets to maintain the stipulated line availability and implementation of the PoC pool mechanism for billing and collection. Additionally, RSWPL has SECI as the counterparty thereby with payment coming within 15 days mitigating counterparty risk.

Rating sensitivity factors

Downward factors:

• Decline in line availability below 98% on a sustained basis or material decline in PLFs on sustained basis, weakening the cash flow
• Delay in collection under the PoC mechanism

 

Key monitorable

Given the nature of the InvIT platform, the trust will acquire new assets over the medium term. The quality of assets, funding of acquisitions and their impact on the credit risk profile of the trust will be monitorable.

About the Sponsor

SEPL Energy Pvt Ltd is a wholly owned portfolio company of EIYP, whose investment manager is EAAA India Alternatives Limited. EIYP is a SEBI-registered Category I alternative investment fund (AIF), which invests in sectors such as power transmission, renewables, roads and highways and other infrastructure.

Key Financial Indicators (Consol)

Particulars	Unit	2024	2023*
Revenue	Rs.Crore	243	94
Profit After Tax (PAT)	Rs.Crore	-30	-32
PAT Margin	%	-12.2	-34.1
Adjusted debt/adjusted networth	Times	0.56	0.49
Interest coverage	Times	3.5	1.9

*Anzen commenced operations in November 2022

Any other information: Not Applicable