Moody’s Investors Service in its latest report has said that although Indian renewable energy companies failed to meet generation targets in fiscal years 2019 and 2020 that ended in March 2019 and March 2020 respectively, they will be able to withstand the impact of this under performance thanks to large and diversified portfolios. It said about 15%-20% of Indian wind and solar projects did not meet capacity utilization targets in fiscal years 2019 and 2020 because of wind generation curtailments and lower irradiance for solar projects, which were responsible for 56% and 68% of the underperformance respectively. As a result, rated renewable energy companies’ EBITDA declined 2%-5.6% in fiscal 2020.
It said nevertheless, all rated issuers have undertaken multiple projects, and thus their credit quality benefits from portfolio diversification, which reduces the impact of individual projects. Moody’s analyzed 176 projects totaling 11,462MW across five rated companies - Greenko Energy Holdings (GEH, Ba1 stable), ReNew Power Private Limited (RPPL, Ba2 stable), Adani Renewable Energy (Rj) Limited (AGEL RG, Ba1 negative), Azure Power Energy Ltd (Azure RG1, Ba2 stable) and Azure Power Solar Energy Private Limited (Azure RG2, Ba1 negative).
Despite missed targets, India reported a healthy 20% growth in renewable energy generation over the past five years. Specifically, wind and solar generation grew at a compound annual growth rate of 20% in fiscal years 2015-20, increasing their share of electricity generation in India thanks to declining development costs, strong policy support and investor interest in the sector. Still, if India wants to achieve its target of 175-gigawatt renewable energy capacity by the end of fiscal 2022, Moody’s said it will need to increase renewable energy’s share of electricity generation to around 16%-18% from 10% in December 2020.