Moody's assigns Ba3 to Renew Power's new RG5 senior secured notes

Moody's Investors Service has assigned Ba3 rating to the proposed 7.25-year USD senior secured notes of up to 620 million dollars to be issued by a newly-formed restricted group of ReNew Power Pvt Ltd

Moody's Investors Service has assigned Ba3 rating to the proposed 7.25-year USD senior secured notes of up to 620 million dollars to be issued by a newly-formed restricted group (RG5) of ReNew Power Pvt Ltd (RPPL).

ReNew Wind Energy (AP 2) Pvt Ltd is part of the restricted group. The rating outlook is stable.

Formed specifically to facilitate the proposed USD notes, the restricted group comprises 10 wholly-owned restricted subsidiaries of RPPL. Each entity will be liable as an issuer and guarantor for the USD notes.

The 10 restricted subsidiaries are ReNew Wind Energy (AP 2), Ostro Jaisalmer, Ostro Urja Wind, Ostro Madhya Wind, Badoni Power, AVP Powerinfra, Prathamesh Solarfarms, Ostro Anantapur, Ostro Mahawind Power, and ReNew Wind Energy Delhi.

The proceeds from USD notes will be used to repay outstanding external debt issued by restricted subsidiaries. Post issuance, RG5 may enter into an additional debt facility to refinance any remaining external debt, and to upstream cash to RPPL.

RG5's exposure to currency risk arising from its USD debt servicing obligations will be mitigated by a combination of coupon swaps and call spread options covering the principal repayments at maturity, as well as by the parent guarantee from RPPL.

"The Ba3 rating on the proposed notes reflects the underlying credit quality of RG5 as well as parent guarantee provided by RPPL over RG5's payment obligations for USD notes," said Spencer Ng, a Moody's Vice President and Senior Analyst.

Over 96 per cent of the restricted group's capacity is contracted under long-term power purchase agreements that span at least another 19 years, underpinning RG5's cash flow predictability.

The balance of restricted group's capacity -- a 28 megawatt (MW) project contracted with Maharashtra State Electricity Distribution Company Ltd -- will expire in 2026.

With the exception of a 300 MW wind project (37 per cent of RG capacity) contracted with Solar Energy Corporation of India (SECI), the remaining projects have been operational for at least three years. The SECI project was gradually commissioned between October 2020 and March 2021.

Moody's considers RG5's ramp up risk as manageable, given RPPL's experience and track record in successfully commissioning wind projects in India.