Fitch Ratings has affirmed 'BBB-' rating on Adani Green Energy Ltd Restricted Group 2's $362.5 million senior secured notes (bonds), implying a low risk of default.

Assigning a stable outlook, the rating agency said that credit assessment is supported by the company's 570 MW solar portfolio across two Indian states and long-term fixed-price power purchase agreements (PPAs).

The Adani Green Energy Limited Restricted Group 2's (AGEL RG2) consists of 570 MW of polycrystalline solar projects, a proven technology with a long operating history, a Fitch rating issued on Friday said.

“We regard the operation of these types of solar projects as straightforward and the solar modules are provided by internationally known suppliers” it said.

It stated that Fitch Ratings has affirmed the AGEL RG2's $362.5 million senior secured, largely amortising notes due 2039 at 'BBB-'.

The Outlook is Stable, it held.

The rating rationale

Explaining about rating rationale, it explained that the AGEL RG2's credit assessment is supported by its 570 MW solar portfolio across two Indian states, moderately volatile generation record at portfolio level, long-term fixed-price power purchase agreements (PPAs), commercially proven technology, experienced operations and maintenance contractors, and strong credit metrics.

The restricted group's (RG) financial profile with rating-case debt-service coverage ratio (DSCR) of 1.44x is stronger than that commensurate with a 'BBB-' rating for the asset portfolio, reflecting considerable rating headroom at the current level.

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The credit assessment is constrained by India's (BBB-/Stable) 'BBB-' Country Ceiling, it explained.

The RG is made up of three subsidiaries of Adani Green Energy Limited (AGEL).

The US dollar notes are issued in part by each of the three SPVs (special purpose vehicle) in the RG: Wardha Solar Maharashtra Private Ltd, Adani Renewable Energy (RJ) Limited and Kodangal Solar Parks Private Limited.

The notes are stapled together to mimic the structure of a restricted pool. The issuers directly own operating assets and are not merely lenders to the operating entities, unlike other rated issuance from most Indian RGs.

All covenants or triggers are on an aggregate basis.

Each SPV guarantees the note obligations of the other two SPVs, although the notes constitute each issuer's obligations only on a several basis.

Group Governance Risks

About 'Group Governance Risks' it stated that governance weaknesses at the sponsor level and other group entities, including a highly concentrated shareholding structure across group entities and aggressive debt-funded investments at some entities, can expose all Adani group-related companies to higher contagion risks than previously considered, which can affect their financial flexibility.

“We believe these group-related risks to be lower for the AGEL RG2 due to legal ring-fencing as per a strict cash flow waterfall mechanism in the US dollar notes. The group is re-evaluating its investment plans, especially in non-infrastructure businesses,” it stated.

The Adani family recently sold $1.9 billion in shares across various group entities to a US-based fund, it noted.

Two of the boards at Adani group companies - Adani Transmission Ltd (BBB-/Stable) and Adani Enterprise - approved a plan to raise a total of about $2.5 billion from the stock market.

The additional funding will support financial flexibility across Adani group entities, mitigating the risks, it held.

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