Ratings of ICRA BB and ICRA A4 reaffirmed for bank lines of Sunborne Energy Gujarat One Private Limited; Outlook revised to Positive

Sunborne Energy Gujarat One Private Limited

Instrument Amount Rating

In Crore As on November 12
Term Loans 142.0 [ICRA]BB (Positive) reaffirmed
Non Fund Based limits 8.0 [ICRA]A4 reaffirmed

ICRA has reaffirmed the [ICRA]BB(pronounced ICRA double B) and [ICRA]A4(pronounced ICRA A four)† rating for the Rs 150.0 crores1 term loans and non-fund based limits of Sunborne Energy Gujarat One Private Limited†

The outlook on the long term rating has been revised from „Stable‟ to „Positive‟. While reaffirming the ratings, ICRA has taken comfort from the successful commissioning of the company‟s 15 MW solar power project at Kutch district Gujarat, albeit with a delay of 7 months, and track record of prompt payments since commencement by its customer namely GUVNL. ICRA also takes note of sound management team of the Sunborne Group, with an established track record in solar power industry. ICRA also factors in adequate feed in tariff rates announced by GoG and the encouraging provisions of solar policy of Gujarat including ease of grid connectivity, open access for solar projects and Renewable Purchase Obligations (RPO‟s) target.

The ratings are however constrained by the adverse impact on project economics (as measured by projected debt coverages and project IRR) due to rise in project cost due to delayed commissioning and sharp decline in CER (certified emission reductions) prices in international markets. Further, although the plant was commissioned on 8th June 2012, the average plant load factor (PLF) witnessed by the plant so far has been low at 15.72 % for seven months mainly on account of loss of generation in the key months of March, April and May due to delayed commissioning and lower than projected solar irradiation during above months.

The ratings continue to be constrained by significant technical risks arising from the limited track record of utility scale solar power projects in India and absence of adequate technical performance record of imported equipments in Indian conditions. Ratings are also constrained by the fact that the solar PV projects being implemented currently, including SEGOPL, have relatively high capital costs/MW which makes their power uncompetitive vis-à-vis other conventional power sources. Under this circumstance, ability and willingness of off takers to pay such tariffs will remain a key rating driver. In SEGOPL‟s case, a PPA has been signed with the offtaker namely Gujarat Urja Vikas Nigam Limited (GUVNL) which offers a relatively high feed in tariff of Rs. 15 per unit for 1st 12 years and Rs 5 per unit for next 13 years (agreed in line with Government of Gujarat (GoG) policy). One key risk however with the PPA is that it has a relatively weak take or pay clause in the agreement. The ratings are further constrained by the foreign exchange fluctuation risk on the $11 million term loans availed by the company. Going forward, full year operations of the plant need to be monitored in order to benchmark the actual performance against the initially projected level. The credit risk profile would remain significantly dependent on the timely collection from GUVNL.

Company Profile

SunBorne Energy Gujarat One Private Limited (SEGOPL) is project special purpose vehicle (SPV) set up under Sunborne Group, to develop, manage and operate a 15 MW Solar Photo Voltaic (PV) power plant (“Project”) at Kutch, Gujarat involving a total project costs of Rs 209 crores. Currently, project implementation is in progress and project is planned to be completed by December 2011.

The 15 MW Project was commissioned on 8th June 2012. The solar modules have been sourced from SolarWorld and Suntech Power. This project is being set up under the Gujarat Solar Policy 2009 framework with the approval of state government for the project. Acquisition of private agriculture land is completed and other statutory approvals have also been obtained. SEGOPL has entered into a 25 years Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Limited (GUVNL) with feed in tariff of Rs. 15 per unit for first 12 years and at Rs. 5 per unit thereafter. The total cost the project was Rs 215.0 crores (Rs 14.33 crores per MW) which was funded at a Debt to Equity ratio of 1.95 times.

December 2012

For further details please contact:
Analyst Contacts: Mr. Sabyasachi Majumdar (Tel No. +91-124-4545304) sabyasachi@icraindia.com
Relationship Contacts: Mr. Vivek Mathur, (Tel. No. +91-124-4545310) vivek@icraindia.com

© Copyright, 2012, ICRA Limited. All Rights Reserved.
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