| Nellai Renewables Private Limited | ||||
| Rating outlook revised to 'Positive'; 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 revised its outlook on the long-term bank facility of Nellai Renewables Private Limited (NRPL; part of the Statkraft group) to 'Positive' from ‘Stable’ and reaffirmed the rating at 'CRISIL AA-'.
The outlook revision reflects the timely commissioning of the project in May 2022 and healthy track record of operations since. Positive outlook reflects CRISIL Ratings' expectation that the project would stabilize and operate in line or better than its P90 PLF expectations of 24.64% on a sustained basis.
The rating continues to reflect the strong managerial and financial support, if required, that NRPL will receive from the ultimate parent, Statkraft AS (sponsor; issuer credit rating of A/Stable/A-1 by S&P Global Ratings) along with the explicit support extended by the sponsor for the entire bank facility availed by NRPL. On a standalone level, NRPL faces low offtake risk as it is a group captive project with power purchase agreements (PPAs) tied up for its entire capacity with commercial and industrial (C&I) consumers.
These strengths are partially offset by exposure to refinancing risk as the existing debt is to be repaid in November 2024 along with 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 NRPL and used its criteria for rating solar power projects. Furthermore, CRISIL Ratings has applied its parent notch-up framework to factor in the support available to NRPL from the ultimate parent, Statkraft AS. |
Key Rating Drivers & Detailed Description Strengths: Strong financial, operational, and managerial support from the ultimate parent: Statkraft is the largest renewable energy producer in hydro in Europe, with about 60.2 TWh of generation in 2022. Most of the group's generation stems from its hydro plants in Norway and Sweden, representing about 76% of installed capacity. Statkraft has a consolidated installed power generation capacity of more than 19 GW and under construction renewable capacity of 1.6 GW as of December 2022. The credit strength of Statkraft AS is based on its ownership by the government of Norway, low-cost and flexible hydropower production, and robust liquidity sources such as free cash, available credit lines and robust cash flow from operations.
Statkraft views India as one of the strategic countries for its investments in the long run. The management has articulated its strong commitment for expanding its portfolio for renewable energy including hydro, wind and solar in India. Thus, NRPL being part of the group is likely to receive strong managerial and financial support, if required, from Statkraft. Further, group’s intention to support the project is evident from the fact that sponsor has infused required equity funds for project’s implementation in a timely manner. The operational and management control of NRPL will lie with the sponsor. Any change in the support philosophy or business linkages between the sponsor and the rated entity will be a key rating sensitivity factor.
Additionally, Statkraft AS has extended corporate guarantee and standby letter of credit (SBLC) from Svenska Handelsbanken AB (foreign currency rating: AA-/Stable/A1+; local currency rating: AA-/Stable/A1+ by S&P Global Ratings) for debt facilities availed by NRPL. The sponsor is responsible for funding any shortfall towards debt servicing at NRPL level on a timely basis.
Revenue visibility provided by PPAs: NRPL has signed PPAs for 25 years (with varying lock in periods for each off taker) at pre-determined fixed tariffs with multiple counterparties under the group captive model. The off takers are C&I customers with healthy to moderate credit risk profiles. The PPAs provide a payment security mechanism in the form of a revolving letter of credit or bank guarantee equivalent to the revenue for two months. The PPAs also have provisions for compensation specific to their termination before the expiry of the lock in period.
Timely commissioning and satisfactory payment track record by counterparties: NRPL’s project was commissioned in May 2022 in line with expectations. The project’s performance in terms of PLF for the 12 months through May 2023 (at 24.3%) has largely been in line with the P90 level (24.64%). The counterparties have made payments largely in line with expectations, within one month from the due date. However, further track record regarding these aspects needs to be established.
Weaknesses: Refinancing risk: The sanctioned term debt of Rs 220 crore is to be repaid as a bullet payment in November 2024. The debt repayment remains contingent on the sponsor’s ability to make adequate and timely refinancing arrangements. The management expects to replace this facility in a timely fashion.
Exposure to risks inherent in operating renewable assets: Cash flows of solar power projects are sensitive to the PLF, which depends entirely on solar irradiance levels, which are inherently unpredictable. Achievement of PLF performance with respect to P90 projections will be monitored closely. |
Liquidity: Strong The liquidity profile of Statkraft AS is strong as reflected by cash and cash equivalents of EUR4.3 billion as on December 31, 2022, unused committed credit lines of about EUR1.1 billion, increased access to bank financing because of sovereign ownership, and healthy generation of cash flows. In addition, the group has substantial flexibility for capital expenditure and assets disposal.
For NRPL, cash available for debt servicing is expected at Rs 37-38 crore in fiscals 2024 and 2025 each. This will sufficiently cover the expected debt obligation (principal and interest) of Rs 18 crore and Rs 32 crore in fiscals 2024 and 2025 respectively. The company has cash and cash equivalents covering debt obligation of two months to tide over any cash flow mismatch. |
Outlook: Positive The positive outlook reflects timely commissioning of the project and collection track record of receivables. CRISIL Ratings believes that the credit risk profile of NRPL will benefit from stabilisation of operating performance in line with the P90 level. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company NRPL is an operational 55 MW solar power plant in Ettankulam village in Tamil Nadu. The project achieved commercial operations date on May 23, 2022. The project is 74% owned by Norway based Statkraft group and 26% by group captive consumers. NRPL has signed fixed tariff PPAs with multiple C&I customers for the entire capacity. |
Key Financial Indicators
*For the period from May 5, 2020, to March 31, 2021 |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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Criteria Details
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