Greenko group embarks on dollar bond issuance to refinance project debt

Greenko Power II Limited (GPL), a restricted group of subsidiaries owned by Greenko Energy Holdings, plans to raise dollar denominated bonds to refinance its project level debt. The group plans to invest $2 billion in pumped storage-based integrated renewable-energy projects with a combined capacity of 2.4 GW.

Greenko is one of the country's leading renewable-energy companies with an operating capacity of 5.2 GW and 138 projects across 14 states.

GPL will lend the proceeds of the US dollar bonds to the operating subsidiaries by investing in their rupee-denominated debt. It does not hold equity in the operating subsidiaries which is held by Greenko.

Singapore sovereign wealth fund GIC holds 55.5 per cent in Greenko. Its other shareholders include Abu Dhabi Investment Authority (ADIA) and ORIX Corporation. GIC and ADIA are committed to invest $750 million in Greenko, in proportion to their shareholding, to support its acquisitions and expansion into renewable-energy storage.

Around 61 per cent of Greenko's 5.2GW of operational capacity is wind, solar is 28% per cent, hydro 9.5 per cent and others 1.5 per cent. Fitch Ratings sees this apart from the diversified geography as a reason for mitigating risks from adverse climatic conditions. Besides, off-takers are also diversified with 72 per cent going to state utilities, 19 per cent to sovereign-owned entities and 9 per cent to direct customers. “We expect Greenko's wind-based generation to return to average historical levels in the financial year ending March 2022 after the dip in FY21 due to a weaker wind season, in line with other Indian wind projects,” Fitch Ratings said in its report.

The group's consolidated net leverage will stay at around 6.0x till FY24 as it has started construction on storage projects, which we expect to begin adding to EBITDA only in FY24. Greenko's FY21 net leverage rose to 9.2x from 6.8x in FY20. This was mostly due to the acquisition of the 940MW in assets, including ORIX's, which was completed in March 2021. After adjusting FY21 EBITDA to include the full-year EBITDA of acquired assets, the leverage would be around 7.7x.

According to Fitch Ratings, the group has some concentration in its exposure to state utilities, with Andhra Pradesh accounting for 25 per cent of off-take by capacity. “Delays in receipts from state utilities put pressure on working capital. We expect most of Greenko's storage-based capacity to be contracted with sovereign-owned entities, which should reduce exposure to state utilities,” it said while assigning a rating of BB to GPL’s issuance.

Foreign-exchange risk also arise as the earnings of Greenko's assets are in Indian rupees, while the notes are denominated in US dollars.

Greenko had a readily available cash balance of $552 million at end-July 2021, against current debt maturities of $483 million, including working-capital loans of $92 million. Fitch Ratings in its estimates said it expected Greenko to generate negative free cash flow in the medium term due to its high capex and payouts for the Teesta project acquisition, which will be funded by a mix of additional debt and equity. “However, Greenko benefits from committed equity investments and solid financial access, supported by its strong shareholders,” it said.