Rationale

 The assigned rating factors in the healthy operating track record of Solaire Surya Urja Private Limited’s (SSUPL’) 140-MW (190 MW DC) solar photovoltaic (PV) project since its commissioning in July 2017 (90 MW AC), September 2017 (50 MW AC). The rating further takes into account the presence of a long-term power purchase agreement (PPA) with NTPC Limited for the entire capacity of 140 MW at a fixed tariff of Rs. 4.35 per unit. On behalf of NTPC Limited, NTPC Vidyut Vyapar Nigam Limited (NVVN) works as the nodal agency, and in turn has signed power supply agreements (PSA) with state owned distribution utilities (discoms). ICRA’s rating continues to favourably factor in the strong credit profile of the counterparty, NTPC – [ICRA]AAA (Stable) / [ICRA]A1+; timely payments from NTPC, supported by payment security mechanism under the PPA and PSA. ICRA takes note of the benefits available to SSUPL from being part of a cash pooling mechanism and the cross-default linkages with three other special purpose vehicles (SPV) – Suprasanna Solaire Energy Private Limited (SSEPL), Nirjara Solaire Urja Private Limited (NSUPL), Ujjvalatejas Solaire Urja Private Limited (USUPL) - of the Edelweiss Infrastructure Yield plus (EIYP) portfolio., wherein surplus cash in either of the SPVs can be used to meet the shortfall in debt servicing of the other SPV. All the four SPVs operate ground-mounted solar power projects, aggregating to 250 MWp spread across two states in India. The rating also takes into account the experience as well as the management quality of the promoter group (EIYP), which has large investments in sectors such as power transmission, renewables, roads and highways etc. Moreover, ICRA takes note of the company’s healthy debt coverage metrics, with cumulative DSCR on the project debt estimated to remain above 1.4 times, supported by a strong operating performance. The long maturity of the project debt and the presence of a debt service reserve account (DSRA) equivalent to one quarter debt obligations also provide comfort from credit perspective. ICRA notes that the promoter contribution for the project is largely in the form of debt instruments, which remain subordinated to the project debt, and the payment of interest on these instruments is subject to meeting the restricted payment conditions stipulated under the loan agreement. The rating also draws comfort from the presence of an experienced sponsor, EIYP, which is operating ~813.2 MWp of renewable energy capacities in India, and its association with the Engie Group, as the operations and maintenance (O&M) of the plant is managed by Engie Group entity, Solairedirect India LLP. The rating, however, is constrained by the vulnerability of cash flow to weather conditions and module performance, as the revenues are linked to the actual units generated and exported, considering the single part and fixed tariff under the PPA. However, the inconsistency in cash flows due to a variation in the solar irradiation level remains relatively low for solar PVbased projects compared to other renewable source-based projects. The rating also factors in the geographic-concentration risk as SSUPL’s solar asset is at a single location. Nonetheless, the company benefits from the availability of relatively high solar radiation at its site in Rajasthan. Further, the debt coverage metrics of SSUPL remain exposed to the interest rate movement, given the fixed tariff under the PPA. Moreover, ICRA also notes that the company’s operations remain exposed to the regulatory challenge of implementing the scheduling and forecasting framework, given the limited experience of the industry players in India in scheduling and forecasting, and the variable nature of solar energy generation. However, the risk of variation is relatively low for solar power projects compared to wind power projects. The Stable outlook on the long-term rating for SSUPL reflects ICRA’s expectation that the company’s operating performance would remain healthy, and it would continue to benefit from the long-term PPA with NTPC and timely receipt of payments.