Issuance not to impact credit rating
S&P Global Ratings assigned its ‘BB-‘ long-term issue rating to ReNew Power Ltd’s (RPL) proposed senior secured notes 30 July 2019, noting the proceeds will be capex.
The issue rating is subject to our review of the final issuance documentation, said S&P.
The proposed issuance will not impact the issuer credit rating on RPL (BB-/Stable/–).
“We estimate that RPL will continue to maintain its funds from operations (FFO) to debt of about 5% and FFO cash interest cover of about 1.5x over the next 12-24 months.
“The company intends to use the proceeds from the note issuance for capital expenditure and existing cash will be used to repay existing indebtedness due to end use restrictions.
‘We also expect RPL to appropriately hedge its proposed notes within 30 days of issuance,” said S&P.
S&P views RPL’s receivables profile as relatively weak compared with its peers, particularly given its 20% exposure to Andhra Pradesh.
It believes the lengthening payment delays from Andhra Pradesh distribution companies to power generators across the industry are unlikely to improve in the short term.
Furthermore, RPL’s fairly short operating track record and high leverage due to ongoing debt-funded capital expenditure constrain the issue rating.
However, these risks are moderated by RPL’s steadying operating performance on a large and increasingly diversified fully stabilized portfolio (assets with more than one year of operational performance), improving counterparty diversity to relatively better credit-quality offtakers (such as Solar Energy Corp of India), and long-term fixed-tariff power purchase agreements.
The stable outlook for the next 12-18 months reflects S&P expectations that RPL’s asset efficiencies will continue to perform in line with P90 estimates.
“We also anticipate that the company will maintain both minimal delays in project execution for future projects and manageable receivables position (or sufficient equity funding to offset delays).”
The outlook also reflects S&P expectations that any changes to the company’s sponsors will not lead to an increase in leverage. fiinews.com
