Rationale

 The rating for Rihmaze Renewables Private Limited (RRPL) factor in the strengths arising from the company’s parentage, being a part of the Cleantech Solar Group, which has reputed sponsors like Keppel Corporation and Shell Plc, along with an experienced management, established track record in developing and operating solar power projects and a diversified solar project portfolio of ~1,081 MW tied up with large commercial & industrial customers. There are cross-default linkages among the various special purpose vehicles (SPVs) of the Group in India, held by Cleantech Solar India OA 2 Pte. Ltd. (CSIOA2) under the co-obligor structure of the project debt financing. The rating favourably factors in the long-term power purchase agreement (PPA) signed by Rihmaze with NSK Bearings India Private Limited (NSK Bearings) at a fixed tariff under the captive mode, thereby limiting the demand and pricing risks for its 3.5MW solar power capacity. NSK Bearings, headquartered in Chennai, is a 100% subsidiary of NSK Ltd. NSK Bearings is involved in the manufacturing and sale of automotive bearings under the brand name NSK in India. The tariff offered under the PPA is highly competitive in relation to the grid tariff for this customer and the PPA would enable the customer to meet its sustainability goals. The rating is, however, constrained by the execution risks given the under-construction status of the project. Nonetheless, comfort is drawn from the availability of the connectivity and the advance progress made in the construction of transmission line. The project is expected to be operational by end of March 2025. Post commissioning, the debt coverage metrics are expected to be adequate with the cumulative debt service coverage ratio (DSCR) over 1.3x over the debt tenure, supported by the long-term PPAs, the long tenure of the debt and competitive interest rates. The company’s revenues and cash flows would remain sensitive to the variation in weather conditions and seasonality, post commissioning, because of the single-part fixed tariff under the PPA. Additionally, the company remains exposed to asset concentration risk, as the entire capacity is located at a single site in Tamil Nadu. Hence, the ability of the project to achieve the design P-90 PLF, post commissioning, on a sustained basis remains crucial from a credit perspective. The rating also takes note of the risk of cash flow mismatch owing to the lower lock-in period under the PPA in relation to the debt tenure. Moreover, the termination payments under the PPA do not cover for the entire debt outstanding. Nonetheless, comfort can be drawn from the competitive tariff offered by the SPV and the Group’s track record in securing PPAs with large industrial and commercial customers. ICRA also takes note of the sensitivity of the debt coverage metrics to the movement in interest rates considering the leveraged capital structure and fixed tariffs under the PPA. Further, the company remains exposed to regulatory risks associated with forecasting & scheduling norms, regulations for captive projects and open access charges. While the open access charges are to be paid by the customers under the PPAs, any significant increase in these charges would impact the competitiveness of the tariffs. The Stable outlook assigned to the long-term rating of the company factors in the expected timely commissioning of the project without any cost overruns, supported by the long-term PPA with strong counterparties thereby providing revenue visibility, post commissioning.