India Ratings and Research (Ind-Ra) has upgraded Adani Green Energy’s (AGEL) long-term issuer rating to ‘IND AA-‘ from ‘IND A+’. The outlook is stable.”The upgrade factors in the 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,” the rating firm said.
The upgrade also reflects AGEL’s change in policy regarding the leveraging of the holding company, as the company has now earmarked funds towards the repayment of a $750 million holdco bond. Additionally, the upgrade considers the creation of a platform within AGEL with Total Energies SE, which allows for partial asset monetisation while retaining consolidation benefits. Other factors include the equity infusion by the promoters through warrants, 25% of which has already been received, and the company’s continued ability to secure both debt and equity to ensure a fully funded under-construction portfolio, the firm said.
The ratings also reflect Ind-Ra’s expectation of a favourable operational to under-construction book ratio, given AGEL’s operational capacity of nearly 10.9 GW, and an increase in annual capacity addition targets to 5GW. The amortising structure of the debt, as opposed to earlier bulleted structures, ensures the amortisation of debt, leading to a 15% tail life for the projects, thus lowering refinance and tail risks. These factors have collectively contributed to a moderation in leverage to more reasonable levels of 5.5-6.5x from the historically high levels of 9.0x, it added.