Rationale

The reaffirmation of the rating takes into consideration the delays in servicing the debt obligations guaranteed by Orient Green Power Company Limited (OGPCL). While ICRA notes that OGPCL is servicing the debt on its standalone balance sheet in a timely manner, there have been delays in servicing the debt guaranteed by OGPCL to its subsidiaries, which hold the wind power assets. The credit profile of the company is constrained by the subdued operating performance of the wind assets under its subsidiaries, coupled with delays in receiving payments for the capacity exposed to distribution utilities (discoms) in Andhra Pradesh (AP). While the recent directive by the High Court of Andhra Pradesh (AP) issued on March 15, 2022, ordering state discoms to honour the terms of the power purchase agreements (PPA) signed with the wind & solar power developers and clear the pending payments is a positive development for the affected developers, the timely implementation of the same remains to be seen. The rating further takes into consideration the company's modest financial risk profile, characterised by weak debt protection metrics and a leveraged capital structure. The rating also remains constrained by the vulnerability of cash flows to the variation in wind power density, given the single part tariff under the power purchase agreements (PPAs). ICRA, however, continues to take note of the established presence and the reasonable track record of the company's operations in the renewable power segment, with an installed capacity of 417 MW in the wind power division, having PPAs with state distribution utilities and industrial customers.