| Green Infra Wind Energy Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' ratings on the bank facilities of Green Infra Wind Energy Limited (GIWEL) and its 'CRISIL AA(SO)/Stable' rating on the non-convertible debenture (NCD). CRISIL has withdrawn its rating on Rs 307 crore short-term bank facilities following request from the company and on receipt of a no-dues certificate from the banker. The rating action is in line with CRISIL's policy on withdrawal of bank loan facilities. |
| Analytical Approach |
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For arriving at the ratings, CRISIL has combined the business and financial risk profiles of Sembcorp Green Infra Ltd (SGIL) and its special-purpose vehicles (SPVs) including GIWEL and Sembcorp Energy India Ltd (SEIL). That is because all the entities, collectively referred to as the Sembcorp Energy India group, are in the same line of business of power generation in India, have a common management, and are all critical to the group. The group has a track record of supporting renewable group entities, and after debt servicing in each SPV excess cash flow is largely available for use across the group. Further, CRISIL has factored in the support of the ultimate parent Sembcorp Industries to arrive at the rating of Sembcorp Energy India group. |
| Key Rating Drivers & Detailed Description |
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Strengths * Management and financial support derived from ultimate parent Sembcorp Industries Sembcorp Industries is a diversified group operating in segments such as energy, water, marine, and urban development, and in 15 countries. It has more than 13,000 megawatt (MW) of gross power capacity and close to 9 million cubic metre of water treatment per day in operation and under development. It is also a world leader in offshore and marine engineering. The group has total assets of over 23 billion of Singapore dollars and is listed on the main board of Singapore Exchange. It is owned by Temasek, which is a Singapore government-held entity. Sembcorp Industries reported a decline in operating margin during the 12 months through December 2018, to 10.2% from 14.1%. CRISIL understands that the company is targeting cost rationalisation and technological upgradation for its marine business segment for improvement of profitability and debt reduction on consolidated level. These efforts have improved the operating margin to 14.5% during the six months through June 2019. That said, performance of Sembcorp Industries will remain a monitorable. Sembcorp Utilities, a wholly owned subsidiary of Sembcorp Industries, holds controlling equity stake in SEIL. Sembcorp Industries has supported its assets globally and in India during adverse situations such as support provided for thermal power assets in India. CRISIL believes the Sembcorp Energy India group is critical to the business of Sembcorp Industries and shall benefit from its managerial support and financial support, if required, in future. Any deviation from this will be a key rating sensitivity factor. * Support derived from being a part of the Sembcorp Energy India group GIWEL enjoys strong managerial support from the group. It also benefits from a demonstrated track record of execution and ramp-up of projects by the group. The group also has a track record of supporting SPVs in the renewable portfolio in the past such as support provided to commissioned wind power projects that were facing tariff issues. The group is likely to maintain adequate liquidity to meet exigencies and shortfall. Any deviation from the policy of support will be a key rating sensitivity factor. The group derives its standalone strength from diverse portfolio of commissioned capacities of 2,640 MW thermal power and 1,377 MW wind and solar power as of July 2019. The portfolio has operational assets in Karnataka, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Tamil Nadu, and Andhra Pradesh. Of the total portfolio of 4,367 MW, the group has strong revenue visibility from long-term PPAs for more than 75% of capacities which are with over eight state discom counterparties, Bangladesh power development board and SECI / PTC (apart from variousgroup captive consumers). Further SEIL has won letter of award (LoA) for long-term PPA from Andhra Pradesh Distribution Company (discom) for 625 MW capacity. This will take the total long term PPA tied-up capacity to 90% of capacities. The operational performance of renewable portfolio saw dip in fiscal 2019 owing to operations and maintenance (O&M) issues from certain third-party contractors. The company has taken over these assets under self O&M. CRISIL expects the performance of assets to be in line with the expectation in fiscal 2020; this will be closely monitored. * Low refinancing risk on account of being a part of Sembcorp Energy India group Refinancing risk of the NCDs is low owing to healthy business risk of underlying assets, long asset life and support derived from being a part of the group. Borrower has a healthy business risk profile owing to diversity of location in Karnataka, Maharashtra, Gujarat and Madhya Pradesh. They have strong revenue visibility, supported by long-term PPAs with Maharashtra State Electricity Development Corporation Ltd, Gujarat Urja Vikas Nigam Ltd, Bangalore Electricity Supply Co Ltd and Madhya Pradesh Power Management Co Ltd. * Ring fencing of receivables for the 248.9 MW projects leading to differentiation from GIWEL's rating of the NCDs The rating on the 248.9 MW wind power project's NCD facility is based on ring fencing of the project cash flow and receivables in a trust and reserve account (TRA), which shall be monitored by an independent TRA agent (or trustee). Also, security on the project's assets including all receivables and future cash flows is only created for the NCD holders and working capital lenders of the projects, and no charge shall be given to or shared with any other lenders. Weaknesses * Residual project execution risks Of the total renewable power capacity of the Sembcorp Energy India group, around 20% is under implementation. However, despite residual project execution risk, there will be benefits from the demonstrated track record of execution. Any delay in commissioning of the project is a key monitorable. * Exposure to risks related to merchant price movements for 30% of thermal power capacity The Sembcorp Energy India group has 2,640 MW of coal-based thermal power plants. It has long-term PPAs for 1,570 MW, on net generation basis, of this capacity. It is currently selling power generated from untied capacity on a short-term / medium term basis, which exposes this capacity to volatility in merchant rates. Until the capacity gets tied up in a long-term PPA, the quantum of power sold on short-term basis / medium term, at a rate higher than variable cost of generation, will remain a key monitorable. The group has recently received LoA for 625 MW from the Andhra Pradesh discom. Signing this PPA shall reduce the risk. Liquidity: Strong The Sembcorp Energy India group has strong liquidity. Cash flow available for debt servicing is projected at more than Rs 2,650 crore per annum over fiscals 2020 and 2021, against yearly long-term debt servicing obligations (including principal and interest payment) of around Rs 2,000 crore. The group has investment requirements of over Rs 550 crore cumulatively in fiscals 2020 and 2021 towards under-construction projects and group has received Rs. 517 crore in July 2019 as equity infusion towards the same. CRISIL believes the Sembcorp Energy India group has sufficient liquidity to meet its repayment obligations and finance incremental investment requirements in various subsidiaries. Further, support can be taken from Sembcorp Industries, if required. Additionally, for the thermal projects, fund-based limit was utilised at an average of about 70% for project 1 and around 40% for project 2 during the six months through July 2019. |
| Outlook: Stable |
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CRISIL believes GIWEL will sustain its credit profile over the medium term on the back of continuing support from Sembcorp Energy India group, healthy revenue visibility of the group's operational portfolio and improving operating performance of consolidated Sembcorp Industries group. |
| About the Group |
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GIWEL is a majority held subsidiary of SGIL that has a portfolio of 801 MW wind power projects. It has 449 MW operational wind power projects and 352 MW under-implementation wind power projects. Operational projects are in Maharashtra, Karnataka, Madhya Pradesh and Gujarat. The company has signed long term PPAs with MSEDCL, GUVNL, BESCOM and MPPMCL. Under-implementation project have Solar Energy Corporation of India as counter-party. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Any other information:
* Upfront creation of liquidity in form of debt service reserve account shall be done in form of cash or bank guarantee (already in place) |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
# Fully interchangeable with working capital, overdraft facility * includes sub-limit of Rs 900 Cr for letter of credit/ letter of credit bill discounting ^ Fully interchangeable with Bank Guarantee, Letter of credit and overdraft facility | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
# Fully interchangeable with working capital, overdraft facility * includes sub-limit of Rs 900 Cr for letter of credit/ letter of credit bill discounting ^ Fully interchangeable with Bank Guarantee, Letter of credit and overdraft facility | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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