JSW group's renewable energy unit to raise Rs 3,900 crore term loan

JREVL is developing an 825 Mw hybrid plant (225 Mw solar, 600 Mw wind) at a cost of Rs 5,255 cr; India Rating has assigned an "A+" to the loan

JSW Renewable Energy (Vijayanagar) Ltd (JREVL) is raising a term loan of about Rs 3,900 crore to fund its project. The JSW group’s power business unit will also use the money to repay Letter of credit (LC) facilities at maturity.

JREVL is developing an 825 Mw hybrid plant (225 Mw solar, 600 Mw wind) at a cost of Rs 5,255 crore, which is being funded in a debt-equity ratio of 75:25. India Rating has assigned an “A+” to the term loan. Equity worth Rs 542 crore has been infused in the project till September 30, by the parent and sponsor JSW Energy Ltd (JEL).

The rating factors in timely completion of the solar plant and the comfort derived from the management’s confirmation of support from JEL during the construction and stabilisation period.  JEL, which owns 74 per cent in JREVL, is into power generation and transmission, primarily in Karnataka, Maharashtra, Rajasthan, and Himachal Pradesh.

There is strong revenue visibility due to the presence of a long-term power purchase agreement (PPA) that has a healthy tariff with a strong counterparty, JSW Steel Ltd, group’s flagship entity. The company would gain from the minimum guaranteed power offtake clause in the PPA and no termination at convenience, which cushions JREVL’s revenue against any downturn.

The firm has a 25-year PPA with JSW Steel for the entire project capacity of 825 Mw, at a fixed tariff. The PPA specifies a round-the-clock contracted capacity of 275 Mw with a minimum annual supply equal to 80 per cent of the contracted capacity. The presence of the long-term PPA assures cash flows to the project and largely mitigates the revenue risk.

For the wind power plant, the company requires 223 land parcels spread across several villages. Of these 151 land parcels have been acquired till the end of October. The rest, which are on forest, government and private land, are under various stages of approvals and would be acquired shortly.

India Ratings said the rating for the loan is constrained by the construction risk in the wind project and the limited operational track record of the solar project. The timely commissioning of the project without any major debt-funded cost overrun remains a key rating monitorable.