India Ratings affirms ‘A’/Stable rating on JSW Energy’s 300 MW Gujarat solar project loans

India Ratings and Research (Ind-Ra) has affirmed the IND A/Stable/IND A1 ratings on JSW Renew Energy Ten Ltd’s (JSWRE10L) INR 11.32 billion bank loan facilities, citing the project’s advanced construction stage, long-term revenue visibility under a 25-year power purchase agreement (PPA) with a strong counterparty, and strong sponsor support from parent JSW Energy Ltd.

JSWRE10L, an arm of JSW Energy, is developing a 300 MW AC (429 MW DC) solar project in Gujarat’s Kutch district. The company has signed a 25-year PPA with Gujarat Urja Vikas Nigam Ltd (GUVNL) at a fixed tariff of INR 2.66/kWh, ensuring high revenue visibility and low offtake risk for the company.

Ind-Ra noted that JSWRE10L has commissioned 216.7 MW AC of its total 300 MW AC capacity, with the remaining capacity expected to be commissioned shortly. Given the advanced stage of project completion, construction risk has been mitigated to a large extent.

The rating is also supported by the sponsor’s established track record in developing power projects. JSW Energy has undertaken to fund any cost overrun in implementing the project and ensure that power evacuation as prescribed under the PPA is available before the scheduled commercial operation date. Ind-Ra believes the project will continue to receive managerial and financial support from the sponsors during the entire construction and operational phase.

The rating is further supported by the promoter’s undertakings to create a debt service reserve (DSR) and, if required, resize the debt to achieve the base-case financial parameters if the project fails to meet the base-case energy generation levels during any two of the initial three full financial years following the commercial operations date.

However, the rating is constrained by uncertainty in evacuation due to operation in temporary General Network Access (GNA), the timeline for the receipt of the final GNA, the commencement of supply to GUVNL under power purchase agreement (PPA) and the sponsor support requirement during operation in temporary GNA.