Moody's Investors Service has assigned a (P)Ba3 rating to the six-year US dollar senior secured notes offering of up to US$450 million to be issued by India Green Power Holdings (IGPH). Proceeds will be used to subscribe to nine-year non-convertible debentures (NCDs) to be issued by a newly formed restricted group (RG4), comprising seven wholly owned or majority-owned subsidiaries of ReNew Power Private Limited.
At dollar bond redemption, IGPH will exercise its put right to require the restricted subsidiaries to redeem the NCDs, and use the proceeds to repay the dollar bond principal. The restricted subsidiaries, in turn, will use the Indian rupee proceeds to repay all their outstanding external debt.
RG4's renewable energy projects are all located in India. The restricted subsidiaries are ReNew Solar Energy (Karnataka); ReNew Solar Energy (TN); ReNew Wind Energy (Karnataka); ReNew Wind Energy (MP Two); ReNew Wind Energy (Rajkot); ReNew Wind Energy (Shivpur); and ReNew Wind Energy (Welturi).
IGPH's exposure to currency risk arising from its dollar bond servicing obligations will be mitigated by a combination of coupon swaps, forward currency options and additional redemption premiums it is entitled to receive from RG4 under the NCDs.
Moody's assessment of RG4's underlying credit quality takes into consideration the expectation of stable cash flow underpinned by long-term, fixed-tariff power purchase agreements (PPAs) during the bond tenor, the diversity and operating track record of RG4's renewable projects, its exposure to depreciation in the INR exchange rate, its high financial leverage, and RG4's exposure to financially weak counterparties with a history of payment delays.
About 57% of the restricted group's capacity is contracted with state-owned distribution companies at set tariffs under PPAs that have remaining terms of at least 15 years. Cash flow from these long-term PPAs provides a solid foundation of predictable cashflow for the restricted group.
The remaining 43% of RG4's contracted capacity will expire during the term of the proposed bond, thereby exposing the group to a likely reduction in tariffs given the sustained fall in the cost of renewable generation in recent years. This includes about 118MW of capacity sold to distribution companies under shorter contracts that will expire in 2026 and 2027, as well as approximately 101MW of capacity contracted with industrial users under group captive arrangements.