India Ratings and Research (Ind-Ra) has upgraded Adani Green Energy Limited’s (AGEL) Long-Term Issuer Rating from ‘IND A+’ to ‘IND AA-‘. The outlook is stable, reflecting the company’s robust operational performance, improved leverage metrics, and strategic initiatives aimed at enhancing its financial stability and growth prospects.
The upgrade considers AGEL’s continued strong operational asset performance and a scale-up in execution, with annual capacity additions projected to increase to 4GW-5GW from the previous 2.5-3.5GW.
The rating also factors in healthy counterparty diversification and a reduction in receivables, leading to better cash flow from operations.
Ind-Ra’s rating action includes several specific upgrades and affirmations. The long-term issuer rating was upgraded to ‘IND AA-‘, and both fund-based and non-fund-based limits saw similar upgrades.
Notably, the size of fund-based limits was reduced to Rs 2.80 billion from Rs 5.15 billion, and non-fund-based limits were reduced to Rs 97.25 billion from Rs 105.05 billion.
AGEL’s improved leverage is a key driver of the rating upgrade. The company has moderated its leverage to more reasonable levels (5.5-6.5x) from historically high levels of 9.0x.
This improvement is due to equity infusions, asset monetization, and better operational performance.
AGEL has also changed its policy to earmark funds for repaying the USD 750 million holdco bond, further strengthening its financial position.
The creation of a platform within AGEL with Total Energies SE is another significant factor. This partnership allows for partial asset monetization while retaining consolidation benefits.
The equity infusion by promoters through warrants, with 25 per cent already received, and the company’s ability to secure both debt and equity to ensure a fully funded under-construction portfolio also contribute to the positive rating action.
AGEL’s operational cash flow remains strong, supporting its debt obligations and equity requirements for new projects.
The company’s strategy of using letters of credit and revolving construction facilities ensures timely debt tie-up for its special purpose vehicles (SPVs), mitigating funding risks.
AGEL’s operational capacity increased to 10.9GW at the end of FY24, up from 8.1GW in FY23 and 5.4GW in FY22. The operational portfolio is diversified, with 72 per cent of counterparties rated ‘AA+’ and above, and 6 per cent as merchant exposure.
The portfolio’s composition, with 68 per cent solar, 13 per cent wind, and 20 per cent hybrid, along with a high DC ratio, lowers variability in generation and cash flow.
The company’s sound operating parameters are evident in its healthy plant load factors (PLFs) and continuous capacity additions.
AGEL’s consolidated EBITDA increased to Rs 73 billion in FY24, up from Rs 55 billion in FY23 and Rs 35.1 billion in FY22.
The run-rate EBITDA (excluding other income) stood at Rs 92 billion, indicating a strong financial performance that supports cash flow from operations.
AGEL’s liquidity is reinforced by its access to capital markets and the revolving construction facility.
The company’s cash flow from operations increased to Rs 77.1 billion during FY24, while its total project-specific debt stood at RS 536 billion.
The repayment of the USD 750 million holdco bonds, due in FY25, has been defeased, ensuring no immediate liquidity pressures.
AGEL’s large under-construction portfolio of 11.4GW provides growth visibility, with risks managed through strategic land banks and softened module prices.
The company’s forex exposure is mitigated through 100 per cent hedging of interest and principal payments, reflecting prudent financial management.
