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.
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