Company to add capacity

S&P Global Ratings today assigned a ‘BB-‘ long-term issuer credit rating to ReNew Power Ltd (RPL). The outlook is stable.

The rating on RPL reflects the company’s relatively weaker receivables profile compared with peers and a fairly short operating track record, particularly for its solar projects.

“Furthermore, we expect leverage to remain high due to ongoing debt-funded capital expenditure (capex) as the company pursues its capacity additions,” said S&P in a release on 3 May 2019.

Moderating these risks are RPL’s steadying operating performance on a large and increasingly diversified fully stabilized portfolio (assets with more than one year of operational performance).

This is supported by a high proportion of regulated long-term power purchase agreements (PPAs), which provides cash flow stability.

S&P also expect counterparty diversity to improve with increasing exposure to better credit-quality offtakers.

“We believe RPL is exposed to counterparty risk and delayed payments from Indian state electricity boards (SEBs) that have demonstrated patchy collection track records in the past,” it said.

65% of RPL’s revenue come from SEBs of Andhra Pradesh, Madhya Pradesh, Karnataka, and Telangana.

Given the high concentration of SEBs, RPL’s receivables track record has shown a higher number of payment delays in the past compared with its Indian peers.

However, RPL’s receivables position is expected to remain manageable, given the company’s increasing diversification toward better-quality counterparties such as Solar Energy Corp. Of India (SECI) or NTPC Ltd. (BBB-/Stable/–).

“We expect these counterparties to account for about 20% of RPL’s revenue by FY2021 and close to 40% by FY2022,” said S&P.

RPL benefits from good scale and diversity, which S&P believe will support operating stability. It is the largest renewable company in India, with a fully stabilized portfolio of more than 3 gigawatts (GW) (as of March 31, 2019) and operating 80 projects across the country. fiinews.com