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Fitch Affirms Adani Green Entities' Dollar Notes Rating At 'BB+'; Outlook Stable

The $500-million senior secured notes were issued in part by each of the three special purpose vehicles of Adani Green Energy.

<div class="paragraphs"><p>Solar panels. (Source: Adani Green Energy’s official Instagram handle)</p></div>
Solar panels. (Source: Adani Green Energy’s official Instagram handle)

Fitch Ratings affirmed ratings on $500 million notes of three Adani Green Energy Ltd. entities at 'BB+' with a stable outlook.

"The notes have a bullet repayment in December 2024, but the refinancing risk is mitigated by the long remaining terms of the PPAs for an operating solar portfolio, the group's recent ability to raise capital, and a senior debt restricted amortisation account," it said in a May 25 note.

The dollar senior secured notes were issued in part by each of the three special purpose vehicles in the restricted group—Adani Green Energy (UP) Ltd., Parampujya Solar Energy Pvt., and Prayatna Developer Pvt.

The issuers directly own operating assets and are not merely lenders to the operating entities, unlike other rated issuance from most Indian restricted groups, the rating agency said.

The rating is underpinned by long-term fixed-price power purchase agreements, commercially proven technology with a pure solar portfolio, experienced operation and maintenance contractors, and adequate financial profile, it said.

The agency considered revenue from state-owned NTPC Ltd., and Solar Energy Corp. of India Ltd., to which AGEL RG1 contracts 57% of its total capacity, as fully contracted revenue and apply the fully contracted project threshold.

"We have noticed improvement in the receivables collection from state-owned distribution companies following the introduction the Late Payment Surcharge rule in 2022," it said.

Key Rating Drivers

  • Experienced contractors and proven technology, even as operation risk remains in the "Midrange" because the operating cost forecast is not validated by an independent technical advisor.

  • Power generation lower than expected in FY22. Power generation in FY23 almost the same as last year's generation.

  • Long-term fixed-price price power purchase agreements—40% of its total capacity with NTPC and 17% with SECI, with the remaining capacity contracted with various state distribution companies under 25-year fixed-price PPAs, which protect the portfolio from merchant price volatility.

  • Bullet repayment with protective structural features.

  • Group governance risks include weaknesses at the sponsor level and other group entities, including a highly concentrated shareholding structure across group entities and aggressive debt-funded investments at some entities. However, group-related risks expected to be lower for AGEL RG1 due to legal ring-fencing, as per a strict cash flow waterfall mechanism in the U.S. dollar notes.

Disclaimer: AMG Media Networks Ltd., a subsidiary of Adani Enterprises Ltd., holds 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.