Rationale

 For the [ICRA]BBB(CE)(Stable) rating

 The above rating is based on the strength of an unconditional and irrevocable corporate guarantee provided by Cleantech Solar Asia 2 Pte. Ltd. (CSA 2) for the rated bank facilities. The Stable outlook on this rating reflects ICRA’s outlook on the credit profile of the guarantor, CSA 2. CSA 2 is a wholly owned subsidiary of Cleantech Renewable Assets Pte. Ltd., which in turn is 51% owned by the Keppel Consortium and 49% by Shell Singapore Pte. Ltd. The renewable portfolio of the Cleantech Group in India and Southeast Asia is managed under two holding entities – Cleantech Solar Asia Pte Limited (CSA) and Cleantech Solar Asia 2 Pte Limited (CSA 2). While CSA has operational renewable assets of 614 MW, CSA 2 has a portfolio 442.2 MW, wherein the operational capacity is 76.9 MW and the balance is under construction. This capacity is being developed under various subsidiaries of CSA 2 and the entire capacity is expected to be operational in CY2024. The company has achieved financial closure for ~72% of the underconstruction capacity and equity funding has been tied up, thus mitigating the funding risk to an extent. The solar power projects under CSA 2 are spread across multiple locations in Tamil Nadu, Maharashtra, and Karnataka, leading to geographical diversification and partly insulating against PLF variations. Also, the presence of a diversified customer profile provides comfort against counterparty credit risks. The assigned rating favourably factors in the long-term power purchase agreements (PPAs) for the solar and wind power portfolio with industrial customers at largely fixed tariffs under the captive mode, thereby limiting the demand and pricing risks. Further, the rating draws comfort from the strong credit profile of these customers, which is expected to lead to timely realisation of payments for the projects. The rating also factors in the benefits of the Cleantech Solar Group’s experience in developing and operating solar power projects for commercial and industrial customers in India and South-East Asia along with the presence of strong shareholders like Shell and Keppel. However, the rating is constrained by the vulnerability of the cash flows and debt coverage metrics of the renewable power projects to their generation performance, given the single part tariff under the PPA. Any adverse variation in weather conditions or inability to ensure adequate O&M practices for the solar and wind assets would impact the generation and consequently the cash flows. A demonstration of generation performance in line or above the appraised estimate remains a key monitorable, given the limited track record of the portfolio. Further, as 83% of the portfolio is under construction, the commissioning and stabilisation of these assets in a timely manner and demonstration of the designed generation performance remains important. Further, the open access-based capacity in the portfolio remains exposed to the regulatory risks of implementing the forecasting & scheduling regulations and revision in regulations for captive projects and open access charges.