Press Release Renew Power Ventures Private Limited

1 1 CARE Ratings Limited Press Release Renew Power Ventures Private Limited January 04, 2018 Ratings Facilities/Instruments Amount (Rs. crore) Rating1 Rating Action Commercial Paper (Rs. Fifty crore only) CARE A1+ [A One Plus] Assigned Details of instruments/facilities in Annexure-1 Detailed Rationale & Key Rating Drivers The rating assigned to the proposed commercial paper issue of Renew Power Ventures Private Limited (RPVPL) takes into account experienced and resourceful promoters with majority equity stake held by the Goldman Sachs group, experienced and qualified management, significant amount of equity capital raised from Private equity investors including fresh round of equity received in FY16 (refers to the period April 1 to March 31)

2 And FY17, which provides capital base for funding the projects under development as well as future projects, the company s position as one of the largest players in the renewable Power segment in India with a diversified project portfolio, satisfactory track record of commissioning and operations of the renewable Power projects, comfortable financial risk profile marked by strong liquidity and comfortable debt protection metrics. The ratings also derive comfort from long-term revenue visibility with long-term Power purchase agreements (PPAs) for operational capacity of the group under various subsidiaries, the company s strategy to maintain liquidity specifically to meet any contingencies of the operational projects and favorable policy framework and demand outlook for the renewable energy sector.

3 The rating is, however, constrained by RPVPL s large expansion plans to increase the installed Power capacity leading to sizeable capital requirement as well as exposure to inherent project implementation and stabilization risks, although said risks are mitigated to an extent by healthy capitalization of RPVPL, track record of raising funds, and relatively short execution cycle of setting up renewable energy projects. The ratings are also tempered by refinancing risk pertaining to masala bonds and NCDs issued, short-to-medium track-record of operations of a significant portion of the operational capacity, dependence on climate conditions for Power generation and counter party credit risks as majority of the revenue is dependent upon Discoms having moderate to weak financial risk profiles.

4 Going forward, timely completion of under implementation projects within the envisaged cost, Power generation at the envisaged Plant Load Factor (PLF)/Capacity Utilization Factor (CUF) along with timely receipt of payment from the off-takers, successful refinancing of various NCDs including masala bonds and the ability of the company to timely raise funds towards the planned projects under the subsidiaries without impacting its capital structure adversely would be the key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Experienced and resourceful promoters with majority equity stake held by the Goldman Sachs group: RPVPL is engaged in renewable Power generation business, mainly through its wholly-owned/majority-owned SPVs.

5 Mr. Sumant Sinha, Founder & CEO of RPVPL, is well-qualified and has more than two decades of experience in leadership roles across various organizations. The Goldman Sachs group, through its investment arm, GSH, has been making significant equity investment in RPVPL since FY12 and is the majority shareholder. Subsequently, other investors, ADB, SACEF, ADIA (through its arm Green Rock A 2014 Ltd) and JERA have made significant investment and also GSH has participated in further rounds of equity fund raising by the company. One of the largest players in the renewable Power segment in India with well-diversified portfolio: The company has expanded its capacity significantly to become one of the largest renewable energy company in India.

6 As on November 2017, RPVPL has operational capacity of more than GW (64% Wind and 36% Solar), majority of which have tied up 1 Complete definition of the ratings assigned are available at and other CARE publications 2 CARE Ratings Limited Press Release long-term PPAs. In addition, the company has about 1207 MW of Power projects under implementation or in planning stage. Also, in terms of location of the operational projects, the company is diversified. The company is providing Power to a diversified set of off-takers having moderate to weak financial risk profile, though the risk is mitigated from diversification.

7 Successful track record of commissioning and operations of projects: Despite a rapid scale up of capacity, the company has been able to complete majority of the projects in a timely manner. Although a significant portion of the capacity has short to medium track record of operations, the operational track record has been satisfactory, so far. Long-term revenue visibility for operational capacity: As on November 2017, RPVPL has operational projects having aggregate capacity of more than GW. Majority of the operational capacity is tied up under long-term PPAs ranging between 10 and 25 years, at fixed tariffs, which provides long-term revenue visibility. Comfortable financial risk profile of RPVPL though exposed to refinancing risk: RPVPL has a comfortable financial risk profile, marked by healthy liquidity, comfortable capitalization for meeting the equity commitments for the under execution projects of SPVs and comfortable solvency position.

8 However, overall gearing ratio is expected to increase going forward with the increase in capacity. Total receivables stood at crore as on March 31, 2017 which increased to crore as on September 30, 2017 mainly due to higher operating capacity and higher receivables due to high wind season billing. However, the company has sufficient liquidity and has extended need-based support to SPVs whenever required, to take care of interim cash flow mismatches. As on October 31, 2017, RPVPL had cash & bank balance of crore at standalone level and crore at consolidated levels. Furthermore, most of the projects have 2-quarter DSRAs and working capital limits are also there to take care of cash flow mismatches.

9 In February 2017, RPVPL raised around crore through the issuance of Masala Bonds which have a bullet repayment at the end of 5 years from issuance February 2022. Also, RPVPL has issued NCDs for wind projects directly housed under RPVPL and other general corporate purposes. Timely refinancing of the masala bonds and NCDs will be crucial. Key Rating Weaknesses Large expansion plans: With the fund raising from JERA (completed in March 2017), the company has sufficient funds for equity investment in the under implementation projects. Nevertheless, the company s future expansion plans may result in additional requirement of funds, for which the company would be dependent upon fund raising from Private equity investors and capital market/IPO, besides debt.

10 Counter party credit risks: Since the company s SPVs are selling a significant portion of Power to the state distribution utilities having moderate to weak financial risk profile, it is exposed to the credit risk associated with exposure to state distribution utilities. However, the risk is mitigated to an extent due to diversification in terms of off-takers. Susceptibility of operating performance to variability in wind patterns and climatic conditions: Wind projects are exposed to inherent risk of weather fluctuations leading to variations in the wind patterns which affect the PLF. The company has also forayed in the solar Power segment. Achievement of desired solar Power generation would be subject to change in climatic conditions, amount of degradation of modules as well as technological risks.