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India Ratings Upgrades Acme Hisar Solar’s Term Loans to ‘IND A’; Outlook Stable

India Ratings Upgrades Acme Hisar Solar’s Term Loans to ‘IND A’; Outlook Stable


India Ratings and Research (Ind-Ra) has upgraded Acme HisarSolar Power Private Limited’s (AHSPPL) senior project term loans’ rating to ‘IND A’ from ‘IND BBB+’. The Outlook is Stable. The detailed rating action is as follows:

Instrument Type Date of Issuance Coupon Rate (%) Maturity Date Size of Issue (million) Rating/Outlook Rating Action
Senior project term loans  30 June 2034 INR2,410.4 (reduced from INR2,579.5) IND A/Stable Upgraded

Analytical Approach: AHSPPL is one of four operational solar assets acquired by Actis GreenGen Limited (Actis) from ACME Solar Holdings Limited on 13 July 2020. The agency has analysed the project at a standalone level while rating the senior debt facilities. In addition to plain equity, Actis has injected funds in the form of optionally convertible debentures (OCDs). The financing documents delineate the subordination of any sponsor debt obligations including these OCDs. Ind-Ra has not considered the servicing of these subordinated sponsor debt obligations while calculating the debt service coverage ratio (DSCR) to arrive at the rating, and has considered sponsor debt as equity-like instruments in line with the financing documents. The inclusion of these funds into the senior debt category could impact the rating.

The upgrade reflects presence of a strong sponsor, creation of a debt service reserve (DSR) through a guarantee from the new sponsor’s, firm power sale agreement with strong counterparty, a likely improvement in coverage ratios due to the ongoing direct current (DC) capacity augmentation progress and likely decrease in operations & maintenance (O&M) costs led by revision in O&M contracts. However, the rating is constrained by the inherent risks associated with solar projects including resource variations.


Change in Sponsor: AHSPPL is 100% owned by Actis, which is a Mauritius-based holding company wholly-owned by Actis GreenLife Limited, which in turn is wholly-owned by Actis Long Life Infrastructure Fund (ALLIF). Actis is a global investment manager with focus on growth markets across Africa, Asia and Latin America. Actis currently manages about USD10 billion of assets under management across energy & infrastructure, real estate and private equity businesses. The management has confirmed that India is a key market for Actis’s Asia’s business and the acquisition of ABSPPL’s operational solar assets is its key strategic  investment in the country as part of its infrastructure strategy. The agency has relied on the sponsor’s ability to fund any contingencies in the project.


Actis owns 99.99% holding in four special purpose vehicles and one share is held by Actis GreenLife. Guarantees have been issued to lending banks and counterparties using bridge lines available at ALLIF level. Of the USD1,234 million commitment with ALLIF, around USD300 million has been invested, resulting in a non-committed capital of over USD900 million.


Firm Offtake Agreement Secures Cash Flows: The rating benefits from firm power sale contract for 25-years with Solar Energy Corporation of India (SECI) at a fixed tariff of INR4.43 per unit. SECI has in turn signed a power sale agreement with Andhra Pradesh Southern Power Distribution Company Limited to sell power at a trading margin of INR0.07 per unit. The power purchase agreement (PPA) stipulates a guaranteed offtake of 116.59 million units corresponding to a plant load factor (PLF) of 26.6% every year. Any generation, above this level, may be purchased by SECI at a tariff of INR3.00 per unit. The project is obligated as per the PPA to generate at least 90.09 million units corresponding to a PLF of 20.6% every year. Failure to meet this generation level shall make the company liable to pay compensation to SECI, subject to a minimum of 25% of the applicable tariff. Ind-Ra believes of the decline in PLF to  below 20.6% to be unlikely as there is adequate cushion on DC capacity.


The PPA also specifies a letter of credit equivalent to one month’s billing amount to be created by SECI as a payment security mechanism. The letter of credit has been created by SECI equivalent to average one month’s billing amount. AHSPPL is also eligible to receive a viability gap funding amount of INR275 million in six annual instalments. The company received the first tranche of INR137.5 million on 27 May 2019 and expects to receive the second tranche by December 2020.


Liquidity Indicator – Adequate: The project’s inbuilt DSR of INR107.3million (funded from project cost) and cash of INR163.6 million as of 30 September 2020 support liquidity to a certain extent. The new sponsor has given corporate guarantee for maintaining DSR for additional (second) quarter, with gross liquidity equivalent to six months’ of debt servicing obligations as stipulated in the financing agreements.


Low Counterparty Risk: The rating is bolstered by the credit profile of SECI. Since project commissioning, SECI has paid bills within an average of 75 days. To pay within 60 days, SECI charges a rebate of 1% or 2% in line with the PPA provisions. Renewable purchase obligations require the distribution utilities to buy solar power and the PPA was signed through reverse bidding. Termination is possible under the PPA if an event of default is triggered by the other party (off-taker). Payment security fund is available for a pool of projects selling power to SECI, however, there is lack of clarity on the application of the fund to prevent delays in tariff payments among different projects. Ind-Ra’s assessment of counterparty is strong.


Low Operating Risk, New O&M Contractor: The project has executed fresh operation and maintenance (O&M) agreement with Mahindra Teqo Private Limited for an agreed price with a fixed annual escalation. The agreement allows both the parties to review the operating fee after every year. The special purpose vehicle will also have to incur solar park charges and land lease charges with a fixed escalation year-on-year. Ind-Ra attributes low operating risk for the project, given the operator’s track record and experience, and low complexity of solar projects.


Improving Debt Coverage Metrics Supported by DC Capacity Augmentation: The project’s debt structure has a flat debt amortisation schedule, leading to restricted cash flows available for debt servicing up to FY21. The project has a comfortable average DSCR of above 1.30x, with the ability to withstand moderate levels of stress on generation, expenses, receivable days and interest rates over the entire debt tenure. In Ind-Ra’s opinion, the structure has reasonable resilience to the moderate amount of stresses applied on the generation levels, operating costs and increase in receivable days from the off-taker. However, any pressure on margins driven by lower PLF and higher O&M expenses could have an adverse effect on project cash flows.


Moderate Operational Track Record: The asset has an operating track record of more than 24 months since commissioning on 21 July 2018. AHSPPL’s generation performance has improved over the 12 months ended March2020 due to operational stabilisation led by full DC capacity ramp up. The performance of solar power projects is susceptible to technological uncertainties, primarily in the initial period of operations. Given sensitivity of cash flows of a solar power project to the PLF is high, these risks can impair debt servicing cushions available for solar projects.


Moderate Debt Structure: The rated debt is repayable over 60 equal quarterly instalments ending FY35. The interest rate is payable quarterly. The project has standard project finance features including cash flow waterfall, a major maintenance reserve (MMR) equalling 5% of module cost (25% of which is to be created within five years from the commercial operations date) and a DSR to cover peak interest and principal repayments for ensuing two quarters. Under loan terms, cash generated in the project will be trapped until two quarters’ DSR is created. Part of equity has been funded in the form of OCDs from the sponsor. Ind-Ra takes comfort from the waterfall mechanism, restricted payment conditions and other terms prioritising the senior debt. Ind-Ra will review the rating in the event of any adverse changes affecting the cash flows for senior debt and if rights of OCDs could impede the senior debt servicing. AHSPPL reported revenue of INR509.98 million in FY20 (FY19: IINR322.2 million) and EBITDA of INR480.63 million (FY19: INR275.4 million).


Negative: Future developments that may, individually or collectively, lead to a rating downgrade are:

–        lower-than expected operational or financial performance, leading to forward-looking average DSCR lower than 1.20x on a sustained basis;

–        depletion of internal liquidity buffers, including cash and DSR;

–        deterioration in the credit quality of the sponsor or the off-taker; and

–        delays in capacity augmentation beyond March 2021.

Operational and financial performance better than Ind-Ra base case estimates leading to forward-looking average DSCR higher than 1.30x on a sustained basis will be positive for the rating.


AHSPPL is a wholly-owned subsidiary of Actis , which is ultimately held by ALLIF. The holding is in the form of common equity shares and OCDs. Ind-Ra has given 100% equity treatment to the debentures according to the terms and conditions shared. AHSPPL operates a 50MW (AC) solar power plant in Ananthapuram Solar Park, Kadapa, Andhra Pradesh. A total 67.67MW of DC capacity is installed against the said AC capacity in a DC:AC ratio of 1.35:1. AHSPPL commenced full commercial operations on 21 July 2018.


Particulars (INR million) FY20 FY19


Total income 505.98 322.2
EBITDA 480.63 275.4
Cash & cash equivalents 61.81 86.5


Instrument Type Current Rating/Outlook Historical Rating/Outlook
Rating Type Rated Limits (million) Rating 29 November 2019
Senior  project  term loan Long-term INR2,410.4 IND A/Stable IND BBB+ /Stable



The covenants delineated in the project documents are as follows:

Nature of Financial Covenant Base value
DSCR More than 20% deviation in banking base case DSCR
Debt to equity ratio 3:1
MMR The borrower shall progressively deposit into the MMR account up to 5% of solar module and inverter cost in a calibrated manner in such a way that the balance in the MMR account is 25% at the end of fifth year, 50% at the end of sixth year, 75% at the end of seventh year and 100% at the end of eight year. The MMR amount shall be utilised for replacement of the solar modules/ inverters based on the requirement.


For details on the complexity level of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.


Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings.

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.


About India Ratings and Research: India Ratings and Research (Ind-Ra) is India’s most respected credit rating agency committed to providing India’s credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India’s fixed income market.

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies.

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank.

India Ratings is a 100% owned subsidiary of the Fitch Group.

Source: indiaratings.co.in
Anand Gupta Editor - EQ Int'l Media Network