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Rating Action:

Moody's upgrades Greenko Dutch to Ba1; assigns first-time Ba1 to notes to be issued by Greenko Solar

15 Jul 2019

Singapore, July 15, 2019 -- Moody's Investors Service has upgraded the senior unsecured ratings assigned to Greenko Dutch B.V.'s (GDBV) backed senior unsecured USD notes to Ba1 from Ba2. GDBV's notes are unconditionally and irrevocably guaranteed by its holding company, Greenko Energy Holdings (GEH).

At the same time, Moody's has assigned a Ba1 rating to the proposed backed senior unsecured USD notes of Greenko Solar (Mauritius) Limited. The proposed notes are also unconditionally and irrevocably guaranteed by Greenko Solar's holding company, GEH.

The outlook for the bond ratings of both Greenko Solar (Mauritius) Limited and Greenko Dutch B.V. is stable.

RATINGS RATIONALE

GEH's obligations under the guarantees will rank at least pari passu with all of its other present and future unsubordinated and unsecured obligations. As such, the ratings for the notes, issued and to be issued by GDBV and Greenko Solar respectively, are in line with GEH's credit profile, which is consistent in turn with a Ba1 level.

"The upgrade of GDBV's ratings reflects GEH's proven execution track record and operating scale; both factors of which have been established by the holding company over time," says Ray Tay, a Moody's Senior Vice President.

GEH has grown its operational renewable energy portfolio to 4 GW as of 31 March 2019, from 1.9 GW as of 31 March 2017. The GEH portfolio is also diverse, with operating assets across wind, solar, hydro and biomass technologies in 14 states in India. This diversification helps mitigate the risk of its exposure to seasonal variations in the availability of renewable resources and strengthens GEH's expertise in an economy moving towards decarbonisation.

While GEH has announced plans for the construction of two integrated renewable power storage projects with a total capacity of 2.4 GW, Moody's expects the execution risk to be manageable, because of GEH's current operating scale and track record in successfully commissioning projects within scheduled timeframes. In addition, Moody's says that GEH's shareholders will likely actively manage material execution risk, should such risk arise.

The credit quality of GEH incorporates two notches of uplift from shareholders, given the very strong credit quality of and strategic oversight by the majority shareholder, GIC Private Limited, a sovereign wealth fund of the Government of Singapore (Aaa stable).

GIC currently owns 64.9% of GEH and has demonstrated its commitment to the company by infusing substantial amounts of equity at the holding company level to help grow GEH, while maintaining financial discipline and enhancing governance and risk management. GEH's shareholders have injected more than $1.4 billion over the past four years and further committed to inject an additional $824 million into the company— including the latest equity injection announced on 11 July 2019 — to help finance the development and construction of its renewable energy portfolio.

"We expect that GIC will provide support to the Greenko group in case of need, in recognition of the unique importance of such an investment," adds Tay. "The control exercised by the majority shareholder, with a strong credit profile, enhances the credit quality of GEH, and this situation flows through to the note issuers via GEH's guarantees."

However, the ratings are constrained by: (1) GEH's high financial leverage; and (2) the weak credit quality of the offtakers. A material deterioration in GEH's credit profile would impact the rating of the USD notes.

The issuers of the notes are incentivized to ensure sufficient hedging is in place, partly because GEH is liable for any shortfall amounts due to the guarantees, which are denominated in USD. To mitigate currency risks — arising from the absence of USD-based revenues to service the proposed USD notes — Greenko Solar will be undertaking a hedging program to manage USD/INR exchange rate movements by implementing hedges for 100% of the interest and principal.

GDBV already has a hedging program in place for the existing notes. GDBV implemented a hedging program to manage USD/INR exchange rate movements by implementing call-spread hedges for the principal, and 100% of the interest. The upper strike rates for the call-spread hedges is INR82 and INR87 per USD, for the 5-year and 7-year bonds, respectively. GDBV has the ability to widen the call-spread upper strike rate if required.

Our view of GEH's credit quality does not factor in any notching for structural subordination because GEH is owned or controlled by stronger entities and benefit from its shareholders' expected support in a distress scenario.

The stable ratings outlook reflects Moody's expectation regarding GEH's credit quality, underpinned by stable cash flows from long-term power purchase agreements and continued support from shareholders. The stable outlook also recognizes GEH's ability to manage ongoing execution risks.

Upward momentum in the notes' ratings is unlikely over the next 12-18 months, based on GEH's business profile and financial strategy, and the credit quality of the offtakers. Nonetheless, Moody's could upgrade the ratings over time, if the credit quality of GEH improves such that the ratio of its funds from operations (FFO) to debt and FFO interest coverage are above 12% and 2.1x, respectively, on a sustained basis.

The ratings could come under downward pressure if: (1) GEH's credit profile deteriorates on a sustained basis, potentially due to weaker operational performance or a delay in the commissioning of new projects; (2) the offtakers' credit quality weakens materially, which could manifest via a substantial increase in receivables; and/or, (3) support from GEH's shareholders weakens, as reflected by a meaningful decrease in GIC ownership or an increase in debt leverage without new equity capital.

The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Greenko Energy Holdings, a Mauritius-based company focused on renewable energy generation in India, is a major energy company with renewable energy capacity totaling 4 gigawatt (GW) as at 31 March 2019, including 2,199 MW of wind, 380 MW of hydro, 1,358 MW of solar, and 78 MW of biomass capacity.

Holders of the USD notes, issued by Greenko Dutch B.V. and to be issued by Greenko Solar (Mauritius) Limited, benefit from an unconditional and irrevocable guarantee from Greenko Energy Holdings and a share pledge over the respective issuer; thereby establishing a linkage between the credit profiles of the issuers, their respective restricted groups and Greenko Energy Holdings.

Greenko Solar (Mauritius) Limited is a special purpose vehicle which will use the proceeds from the USD notes to subscribe to senior secured INR debt to be issued by each of the other Restricted Subsidiaries in the new restricted group (NRG2019), which are wholly-owned/majority-owned by Greenko Energy Holdings. Greenko Solar is also part of NRG2019.

The proceeds from the INR debt to be issued by NRG2019 will be mainly used to refinance the existing project-level debt of the restricted subsidiaries in NRG2019, including project finance debt and shareholder loans associated with the operating projects that the parent transfers to NRG2019. NRG2019 will also use the proceeds to repay debt in relation to Greenko Power Projects (Mauritius) Limited, a non-NRG2019 entity.

Greenko Dutch B.V. is the issuer for the USD350 million senior notes due 2022 and the USD650 million senior notes due 2024. Proceeds from the USD notes were used to subscribe to INR non-convertible debentures issued by each of the other Restricted Subsidiaries in the GDBV restricted group, which are wholly-owned/majority-owned by Greenko Energy Holdings.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Ray Tay
Senior Vice President
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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