Adani Green Energy’s USD notes get 'BB+' rating from Fitch; stock rises

Shares of Adani Green Energy, renewable energy arm of Adani Group, rose over 1% in opening trade on Friday after Fitch Ratings assigned 'BB+' rating with stable outlook to Adani Green Energy Limited Restricted Group 1's (AGEL RG1) $500 million senior secured notes due in 2024. The five-year senior secured notes will be used to refinance its debt.  The market sentiment was further lifted after the company informed the exchanges that its operational wind generation capacity crossed 1 GW with commissioning of 130 MW wind power plant in Gujarat.

“With the successful commissioning of this plant, AGEL’s operational wind generation capacity has increased to 1,101 MW and the total operational renewable generation capacity has increased to 8,216 MW. This places AGEL’s total renewable portfolio well on track to reach its vision of 45 GW capacity by 2030,” AGEL said in a BSE filing today.

Reacting to the rating action, Adani Green Energy shares opened marginally higher at ₹975.30 against the previous closing price of ₹970.80 on the BSE. In the first hour of trade so far, the Adani Group stock rose as much as 1.2% to ₹982.15, while the market capitalisation rose to ₹1.53 lakh crore.  

The stock touched a 52-week high of ₹2,574.05 on August 23, 2022, while it hit a 52-week low of ₹439.35 on February 28, 2023.

AGEL RG1 includes three subsidiaries of Adani Green Energy namely Adani Green Energy (UP), Parampujya Solar Energy Private Limited (PSEPL), and Prayatna Developer Private Limited, with total capacity of 930MW across India.

“The affirmation reflects the credit profile of AGEL RG1, which operates solar generation assets with a combined capacity of 930MW across India. The rating is underpinned by long-term fixed-price power purchase agreements (PPAs), commercially proven technology with a pure solar portfolio, experienced operation and maintenance (O&M) contractors, and adequate financial profile,” Fitch said in a report released on May 25.

The debt is a senior secured five-year bullet bond, a debt instrument whose entire principal value is paid all at once on the maturity date. The notes cannot be redeemed early by an issuer and require issuers to submit a refinancing plan 12 months before maturity.

Fitch said the noteholders would benefit from a standard security package and robust covenants restricting distributions. “The notes have a bullet repayment in December 2024, but the refinancing risk is mitigated by the long remaining terms of the Power Purchase Agreements (PPAs) for an operating solar portfolio, the group's recent ability to raise capital, and a senior debt restricted amortisation account.”

The agency assumes the bullet principal repayment will be refinanced upon maturity by fully amortising debt across the remaining PPA terms at a higher refinancing interest rate of 12%. However, less favorable refinancing terms and structure may have rating implications, it said.

The rating agency assumed that revenue from state-owned NTPC and Solar Energy Corporation of India (SECI), to which AGEL RG1 contracts 57% of its total capacity, as fully contracted revenue and apply the fully contracted project threshold.

AGEL RG1 consists of 930MW polycrystalline solar projects, a proven technology with a long operating history. Fitch opined that the operation of this kind of solar projects as straightforward. “Solar modules are provided by various internationally well-known suppliers. O&M work is carried out by an affiliate company, Adani Infrastructure Management Services Limited, under seven-year fixed-price contracts with 2% annual price escalation. However, the O&M contracts have been revised a few times in the past with lower fixed prices than the original contracts,” it said.

As per the rating agency, O&M cost per MW is comparable to the O&M cost in its rated Indian renewable universe. The operation risk assessment is constrained to 'Midrange' because the operating cost forecast is not validated by an independent technical advisor, it added.

The report also highlighted the group is re-evaluating its investment plans, especially in non-infrastructure businesses. The Adani family recently sold $1.9 billion of shares in various group entities to a U.S.-based fund. Two of the boards at Adani group companies - Adani Transmission and Adani Enterprise - approved plans to raise a total of about $2.5 billion from the stock market. The additional funding will support financial flexibility across Adani group entities, mitigating the risks, it said.

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