India Ratings and Research (Ind-Ra) has upgraded Adani Green Energy Ltd's long-term issuer rating to 'IND AA-' from 'IND A+' with stable outlook.
"The upgrade factors include continued strong operational asset performance, strong execution scale-up, with annual capacity additions likely to be 4GW-5GW annually over the medium term from the earlier 2.5-3.5GW; and healthy counterparty diversification and reduction in receivables, leading to an increase in the (cash flow from operations - interest)/EBITDA conversion compared to historical levels," a statement said.
The upgrade also reflects Adani Green Energy Ltd's (AGEL) change in policy with respect to the leveraging of the holding company, as the company has now earmarked funds towards the repayment of a $750 million holding company bond.
"In addition, the upgrade factors in the creation of a platform within AGEL with Total Energies SE, which allows for part asset monetisation while retaining consolidation benefits, the equity infusion by the promoters through warrants, of which 25 percent has already been received, and the continued ability of the company to tie up both debt and raise equity to ensure a fully funded under-construction portfolio," it said.
The ratings also reflect Ind-Ra's expectation of a favourable operational to under-construction book ratio, given the operational capacity of nearly 10.9 GW and an increase in annual capacity addition targets to 5 GW.
It also takes into account the amortising structure of the debt as against bulleted structures earlier, which ensure amortisation of debt, leading to a 15 percent tail life for the projects, thus lowering the refinance and tail risks.
The above factors have jointly contributed to a moderation in the leverage to more reasonable levels of 5.5-6.5x from the historically high levels of 9.0x.
"The ratings continue to factor in AGEL's robust execution track record; the strong operational performance of its assets with plant load factors (PLFs) between P50-P90 levels of the operational assets," it said.
Also, Ind-Ra factors in healthy diversification among counterparties, with the majority of counterparties belonging to the highest credit quality; portfolio diversification achieved both geographically and in generation sources across wind and solar; and healthy cash upstreaming from the operating SPVs when the restricted covenants are met, thus allowing for debt servicing at the holding company.
AGEL's strengths included being the largest renewable developer in India with sound operating parameters of operational assets and healthy free cash flow to equity.
This, coupled with the balance promoter warrant money infusion of Rs 7,000 crore over FY25-FY26 and equity investment from investors, would ensure adequate availability of equity for the under-construction portfolio.
Ind-Ra expects the annual capex run rate to be stepped up to Rs 24,000-30,000 crore over FY25-FY27 from about Rs 16,000 crore in FY24. The same would entail an annual equity requirement of Rs 18,000 crore over FY25-FY27, of which nearly Rs 7,000 crore would be promoter funds, Rs 8,500-11,000 crore would be internally generated and the balance could be generated from the equity programme.
