Mumbai: Global credit ratings agency Moody's Investors Service has assigned a first-time Ba2 corporate family rating to ReNew Power Ltd (RPL), one of India’s largest private renewable energy companies. The Ba ratings grade is judged to have speculative elements and subject to substantial credit risk.

Moody’s has kept the rating outlook stable.

In its ratings rationale, Moody’s said the group has predictable cash flow backed by long term power purchase agreements, supported by its large and diversified portfolio of wind and solar generation projects, an experienced management team and a track record of support that it receives from its cornerstone shareholders through capital infusions. ReNew is supported by substantive shareholders, which include Goldman Sachs, Canada Pension Plan Investment Board and Abu Dhabi Investment Authority.

However, this is weighed down by ReNew’s high financial leverage, primarily driven by the need for additional debt to fund its commitment to develop another 3GW of generation capacity by March 2021, and counterparty exposure to financially weak off-takers.

“Around 95% of ReNew’s revenue is derived from long-term power purchase agreements with central and state government off-takers, all of which have predefined tariffs," Spencer Ng, Moody's vice-president and senior analyst, said in the note.

Stability in RPL’s operating cash flow also benefits from the geographic diversification in its generation fleet, which reduces its exposure to potential fluctuations in availability of wind and solar resources. During the fiscal year ended March 2019, output from RPL’s portfolio of generation assets has – on an average -- performed broadly in line with Moody's base case expectations, the note said.

Moody’s expects ReNew’s financial metrics to gradually improve over time, because projects currently in development will commence operations and start to contribute to group earnings. The extent and timing of such improvements will depend on the company’s growth plans and the incremental debt that will be required for new projects added to the development pipeline.

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