| Bothe Windfarm Development Private Limited | ||||
| Rating 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 A+/Stable’ rating on the long-term bank facility of Bothe Windfarm Development Pvt Ltd (BWDPL, part of the Continuum restricted group [CRG]). The CRG includes six operational Indian special-purpose vehicles (SPVs) – BWDPL, DJ Energy Pvt Ltd (DJEPL), Uttar Urja Projects Pvt Ltd (UUPPL), Watsun Infrabuild Pvt Ltd (WIPL), Trinethra Wind and Hydro Power Pvt Ltd (TWHPPL) and Renewables Trinethra Pvt Ltd (RTPL) – and the Singapore-based Continuum Energy Levanter Pte Ltd (CELPL). These SPVs (except WIPL) are wholly owned subsidiaries of Continuum Green Energy (India) Ltd (CGEIPL), which is a 100% subsidiary of the Singapore-based, Continuum Green Energy Ltd (CGEL; holding entity for all renewable assets under the Continuum group). CELPL, also a 100% subsidiary of CGEL, raised USD 561 million in fiscal 2021 through six-year US dollar (USD)-denominated notes and used the amount to subscribe to non-convertible debentures (NCDs) issued by the six SPVs in the CRG, with a payment schedule matching that of USD notes.
The rating reflects strong revenue visibility, low offtake risk (with almost the entire capacity of 722.9 megawatt [MW] tied up), diversification benefits enjoyed by the CRG, given that assets are spread across four states with abundant wind supply and no location contributing more than 30% of overall capacity, and expectation of a healthy debt service coverage ratio (DSCR) over the medium term. The rating also factors in the robust financing structure, with the CRG benefitting from strong financial flexibility arising from low level of mandatory amortisation of the USD bond (around 8% of bond value till maturity), mandatory cash sweep (MCS) payment (amounting to nearly 29% of bond value) and non-payment of which does not result in a default, and a bi-annual payment schedule.
These strengths are partially offset by a moderate generation profile with plant load factor (PLF), at a group level, being lower than the P-90 level over the past four fiscals and exposure to high counterparty credit risk, with nearly 50% of the portfolio tied up with state distribution companies (discoms) – Maharashtra State Electricity Distribution Corporation Ltd (MSEDCL) and Madhya Pradesh Power Management Company Ltd (MPPMCL). While there has been improvement in the payment track record of both these discoms, post implementation of late payment surcharge, going forward established track record of timely receipts of payments is a key monitorable. Any delays in receiving payments from these discoms, resulting in stretch in receivables, is a rating sensitivity factor.
Furthermore, the CRG is exposed to refinancing risk, given the balloon payment structure of the bond, and tariff risk as part of the capacity has medium-term power purchase agreements (PPAs) with commercial and industrial (C&I) customers. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of the six SPVs in CRG and CELPL, in line with its criteria for rating entities in homogeneous groups and has equated the rating of the individual SPVs to that of the group. The entities are in a homogeneous group since they have a common promoter, CGEL, which owns a 100% stake in CELPL and all SPVs through CGEIPL, except WIPL (28.75% held by group captive customers and rest by CGEIPL). The entities have a common management and treasury team and are engaged in the same line of business - operating renewable power assets (except for CELPL, which is mainly a vehicle to raise and service USD debt). All entities are critical to CRG. Post servicing of interest and mandatory amortisation payment in each SPV, excess cash flow is available for use across the group. Further, compulsorily fully convertible debentures (CFCDs) amounting to Rs 784.4 crore as on March 31, 2023 (at a consolidated CRG level) issued to CGEIPL, have been treated as quasi equity.
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: Healthy revenue visibility and low offtake risk
The PPA with MSEDCL has a fixed average tariff of Rs 5.76 per unit and is valid till fiscals 2027, while that with MPPMCL carries a fixed tariff of Rs 5.92 per unit and is valid till fiscal 2040. For C&I projects, the capacity weighted average tenure of the PPAs is about nine years with an average lock-in period of 2-3 years. Weighted average gross tariff for C&I customers is linked to discom tariff and at a healthy discount as compared to grid tariff, which mitigates the offtake risk significantly. While C&I projects involve tariff risk on expiry of the PPA over the medium term, the group’s track record of adding and servicing customers will provide comfort.
Strong financial flexibility arising from a partially amortising bond structure
Furthermore, refinancing risk at the end of the bond tenure is partially mitigated by scheduled MCS payments forming nearly 29% of the bond (the group has made all the scheduled MCS payments of around USD 46.3 million up to August 9, 2023). In case of insufficient cash flow, these payments can be rolled forward to the next payment date till the end of the tenure. Also, non-payment does not result in an event of default, thus enhancing the flexibility to manage cash flow. The structure has a well-defined, trustee-managed waterfall mechanism wherein surplus from SPVs can be distributed only after meeting cash flow requirements of all SPVs, including statutory and operational cost, debt obligation and MCS payment, formation of six months of debt service reserve account (DSRA), along with a minimum DSCR of 1.3 times (calculated excluding MCS payments) over the preceding 12 months. This provides sufficient cushion in case of stress on short-term liquidity.
Healthy financial risk profile
Geographically diversified capacity mix
Weaknesses: High counterparty credit risk emanating from exposure to weak discoms
However, post implementation of LPS there has been an improvement in the payment track record of both these discoms. CRISIL Ratings understands that MSEDCL has paid its past dues (amount outstanding till generation for August 2022) and payments for September 2022 – March 2023 generation months were received in around 4.5 months. In the current fiscal, receivables period improved, and payments were received in around 90 days and the same trend is expected to continue going forward.
MPPMCL on the other hand, has opted to liquidate outstanding dues along with LPS, pertaining to generation up to March 2022, by paying equal monthly installments of around Rs 4.6 crore per month over 40 months. As per the management, they have received installments between August 2022 and December 2023. Also, for generation beyond March 2022, MPPMCL has cleared payments for generation till October 2023, and is now expected to pay dues within timelines of 30 days as per PPAs.
As on March 31, 2023, receivables days stood at 100 in the case of MSEDCL and 122 for MPPMCL, an improvement from the peak days of upwards of 400. Nonetheless, long established track record of timely payments will be a key monitorable.
Exposure to inherent risks associated with renewable energy generation
Susceptibility to any significant adverse movement in foreign exchange (forex)
Moderate refinance risk
Exposure to regulatory changes in tariff structure and wind policy The ability of the company to pass on the quantum of these regulatory charges to customers, as per terms of the PPA, remains a monitorable from a credit perspective. |
Liquidity: Strong
Furthermore, DSRA equivalent to six months of debt has been maintained since December 2021. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit from stable cash accrual with performance of projects at healthy PLFs and limited offtake risk. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Incorporated in 2011 and a 100% subsidiary of CGEIPL, BWDPL has installed wind power generation capacity of 199.7 MW in Satara, Maharashtra. It has signed 33 PPAs with MSEDCL for 193.4 MW capacity for 13 years each, at a weighted average tariff of Rs 5.76 per unit.
With respect to the untied capacity of 6.3 MW, CRISIL Ratings understands that as per the direction of the Supreme Court, the company in the interim is billing MSEDCL at the rate of Rs 3.5 per unit.
The Continuum group was founded in 2009, as an independent power producer in the renewable energy segment. In June 2012, North Haven Infrastructure Partners (NHIP), managed by Morgan Stanley Infrastructure Partners, committed to invest up to USD 200 million towards wind projects of the group.
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Key Financial Indicators indicators – BWDPL – CRISIL Ratings – adjusted numbers
Key financial indicators – CRG – CRISIL Ratings – adjusted numbers
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Includes sub-limit of WCDL of Rs 135 crore and Sales Bill Discounting facility of Rs 135 crore |
Annexure - List of Entities Consolidated
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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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Criteria Details
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