Synopsis
On March 10, 2023, Fitch Ratings affirmed Adani Energy Solutions Limited's long-term issuer default ratings at 'BBB-', removing it from the 'Rating Watch Negative' list, highlighting improved funding and revenue visibility.Key Takeaways
- Fitch Ratings affirms AESL's ratings at 'BBB-'.
- Company removed from 'Rating Watch Negative' list.
- AESL shows strong liquidity and funding access.
- Long-term revenue visibility due to low operating risks.
- Projected capital expenditure to reach Rs 175 billion annually.
New Delhi, March 10 (NationPress) Fitch Ratings has confirmed the long-term foreign and local-currency issuer default ratings (IDRs) of Adani Energy Solutions Limited (AESL) at 'BBB-', lifting the company off the 'Rating Watch Negative' list.
Fitch has maintained the ratings as the Adani Group has shown sufficient funding capabilities.
"We believe the risks related to the group's liquidity and funding needs have diminished," stated the global ratings agency.
AESL has shown adequate access to funding since the actions taken by the US, having secured Rs 51 billion from both onshore and offshore banking sources.
The group company, AGEL, has also procured onshore funding to refinance its $1.1 billion construction-linked facility, due in March 2025.
As noted by Fitch, AESL's revenue from its transmission segment, which operates under both cost-plus and tariff-based competitive bidding (TBCB) frameworks, is determined by system availability and “is not exposed to volume risk.”
The low operational risk profile of transmission assets, combined with AESL's strong performance, ensures “long-term revenue visibility.”
"AESL recorded a high asset availability of approximately 99.7 percent in the first nine months of the financial year ending March 2025 (9MFY25), consistent with FY24 levels and well above regulatory standards," noted the international ratings agency.
AESL's credit standing is supported by India's stable and favorable regulatory framework.
"We anticipate that revenue from its transmission assets will continue to represent a significant portion of EBITDA in the medium term, even as the contribution from its smart metering segment rises," the report indicated.
"We project capital expenditure to rise substantially to Rs 175 billion annually in FY25 and FY26 (FY24: Rs 40 billion), propelled by ongoing transmission projects and the smart metering initiative. AESL has secured a contract to install 22.8 million smart meters across five Indian states, following a design, build, finance, own, operate, and transfer model," the note elaborated.
Recently, global brokerage Elara Capital commenced coverage on Adani Energy Solutions Ltd (AESL) with a 'BUY' recommendation and a target share price of Rs 930, indicating a 37 percent potential upside from the current market valuation.
Adani Energy Solutions is poised for substantial growth in its transmission, distribution, and smart meters sectors. Transmission EBITDA is expected to double to Rs 76 billion by FY27E, driven by India's renewable energy (RE) objectives, a 20-25 percent market share in the Rs 840 billion near-term transmission bid, and a Rs 548 billion project pipeline, according to the Elara report.
