India Rating Boosts Adani Green Energy Rating; Outlook Remains Stable

India Ratings and Research (Ind-Ra) has announced an upgrade in Adani Green Energy Ltd’s (AGEL) long-term issuer rating from ‘IND A+’ to ‘IND AA—’. Additionally, the outlook has been maintained as stable, reflecting a positive sentiment regarding the company’s future prospects.

The statement reads, “The upgrade factors in the continued strong operational asset performance, strong execution scale-up, with annual capacity additions likely to be 4GW-5GW annually over the medium term from the earlier 2.5-3.5GW; and healthy counterparty diversification and reduction in receivables, leading to an increase in the (cash flow from operations – interest)/EBITDA conversion compared to historical levels.”

The upgrade additionally signifies a shift in AGEL’s approach towards leveraging its holding company. The company has taken a strategic step by allocating funds specifically to repay a $750 million holding company bond, demonstrating a commitment to improving its financial position and reducing debt burdens.

“In addition, the upgrade factors in the creation of a platform within AGEL with Total Energies SE, which allows for part asset monetisation while retaining consolidation benefits, the equity infusion by the promoters through warrants, of which 25 per cent has already been received, and the continued ability of the company to tie up both debt and raise equity to ensure fully funded under-construction portfolio,” it added.

The ratings also consider Ind-Ra’s positive outlook regarding the operational to under-construction book ratio, driven by the operational capacity of nearly 10.9 GW and an increase in annual capacity addition targets to 5GW. Moreover, the ratings acknowledge the shift from bullet structures to an amortising debt structure, ensuring a gradual repayment schedule extending projects’ tail life to 15 per cent. 

This approach mitigates refinance and tail risks associated with the projects. These factors have contributed to a reduction in leverage, bringing it down to more sustainable levels ranging from 5.5-6.5x, compared to the historically high levels of 9.0x.

“The ratings continues to factor in AGEL’s robust execution track record; the strong operational performance of its assets with plant load factors (PLFs) between P50-P90 levels of the operational assets,” it said.