Delhi-headquartered renewable energy firm Hero Future Energies has completed India’s first large-

scale solar and wind energy hybrid project in the state of Karnataka.
The project at Kavithal, Raichur District, which included an existing 50MW wind farm, now has a
neighbouring 28.8MW solar PV site to form a hybrid system. The project’s evacuation capacity
remains at 50MW since the primary aim is to address grid-integration concerns around variable
power coming from renewable energy.
At the inauguration, Rahul Munjal, chairman and managing director Hero Future Energies, told PV
Tech that despite well-publicised government plans to introduce a wind and solar hybrid policy, none
has been released yet due to uncertainty on how to price such technology combinations. Without
adequate pricing, project developers would not be able to sell their power to a distribution company
(Discom) or partake in an auction where prices are the cornerstone of the bidding.

I’ve always maintained the toughest thing about doing renewables in India is land
Rahul Munjal, chairman and managing director Hero Future Energies, launches the pioneering project.

However, Hero was able to go ahead with this pioneering hybrid, because it is a group captive
project, where the off-takers are a number of unnamed private companies based in the state of
Karnataka. This gave Hero the freedom to deliver the pricing on its own terms, while of course
delivering huge cost savings to the consumers as compared to normal grid electricity.
Munjal said that, were the government to release a suitable hybrid policy, then it would make sense
to move more of Hero’s own existing sites into hybrid systems and he expects much of the rest of
the industry to follow suite with this group captive model for hybrid systems.
Having been one of the first companies to try out a new length of wind turbine blade with Regen
several years back, Munjal maintained that one of Hero’s philosophies is to be first to market with
new technologies and the firm is constantly looking at how to innovate. It is already a heavyweight in
the industry with around 1.2GW installed renewables capacity, with another 500MW under
construction and 300MW now ready for building.
Referring to another Spanish company that claimed its wind projects were working better today than
they had originally forecast 25 years ago, Munjal said the next push in renewables creativity and
R&D will be retrofitting existing sites and working out how to extract more energy from them.

Rural south India – Approaching the site

Flying from Hyderabad in Telangana, towards Karnataka, several individual solar and wind projects -
as well as the occasional thermal power plant - could be seen marking the flat plains of this part of
central, southern India.

A solar project between Hyderabad and Kavithal

Overland, villagers dried red chillies in the sun, sat in the shade of the trees or played cricket in the
cooler morning hours, while traffic waited for herds of goats, horses or sparring cattle to cross the
roads.
Village life

Apart from green pockets of lush agriculture, formed through irrigation, the land is sparse, barren
and sunburnt with temperatures regularly hovering around 40 degrees Celsius at this time of year.
Irrigated green land and the parched regions of Karnataka

Technology
At Kavithal, both the wind and solar plants were developed by Hero Future Energies and built
by EPC contractor Siemens Gamesa.
The wind project uses Siemens Gamesa turbines and inverters, while the solar PV project uses
Gamesa inverters and 320/325W modules from China-based manufacturer Suntech. Cables came
from Hyderabad-based firm KEC International, and steel for mounting structures was sourced locally
to Hero’s specifications.
Beside some of the solar arrays lay a large assembly of boxes bearing the Suntech logo. These
modules were resting in storage soon to be transported within the month to Hero’s 400MW of other
PV capacity being set up in the state.
Suntech modules in short-term storage

Hybrid to grid
Perhaps the most significant offering of a hybrid renewables system is its beneficial impact on the
grid when compared to single technology renewables projects.
Munjal said that wind tends to rise early in the morning and in the evenings, while sunshine comes in
the day, so the two sources of power generation are complementary to each other. Not only does
this smooth out the overall energy production over a 24-hour period, but it also increases the plant
load factor (PLF).
Indeed, individually the wind PLF is 28%, while the solar PLF is 18.7%. This brings the total PLF for
the whole project to 41.8%.
Looking seasonally, wind increases ahead of the Monsoon, said Munjal, but when the rains come,
the wind does start to die down.
The hybrid element is extremely pertinent to India’s renewable energy industry given the increasing
penetration of renewables onto the grid. Consistent forecasts from analysts suggest that the country
will face major grid integration issues in the coming years if network infrastructure is not improved at
the same rate as renewables capacity additions. Indeed both India’s authorities and renewables
industry have been accused of having their ‘heads in the sand’ over the grid integration issue in the
past.
Moreover, the Green Energy Corridors, touted to help evacuate power from states rich in renewable
energy resources (high irradiation and strong, consistent winds) to states with high power demand,
have faced delays and by some reports have also faced a serious lack of funding.

Pricing

To calculate the hybrid pricing, Munjal said that using highly advanced, modern technologies and
software, one can take an assumption of how much solar and wind will be generated separately,
before taking a weighted average of the generation and price.
He said: “The beauty is the price for both gets lowered since the infrastructure is common. You are
using the same evacuation, you are using the same substation etc.”
Indeed, due to the existing wind site, almost all the necessary infrastructure for the solar plant was
already available, and the project only required a few enhancements, such as updating the inverter
technologies. Some extra land had to be purchased for the solar system, which is spread across 65
hectares, but Hero was already familiar with the location, the landscape and the local authorities,
which made the process easier than developing a standard PV project from scratch.
Land headache relief

Typical landscape in Karnataka

Karnataka itself is also particularly affable to renewable energy, because there is plenty of land, with
strong winds and irradiation. Munjal said it will become the next big state for wind capacity after
Tamil Nadu, and it is already a leading state for solar.
However, describing the process of delivering transmission to the project, he said: “When you are
building that 20 kilometre [transmission line] the number of people that you have to encounter… I’ve
always maintained the toughest thing about doing renewables in India is land.”
Indian land records are not digitised so one has to deal with both a private surveyor and a
government surveyor and plots of land that are suitable for a project can be owned by hundreds of
different people.
“Land is only 5-10% of our cost, but 95% of problems lies with land,” said Munjal.
Thus, even though Hero had to purchase some extra land for the project, the hybrid element actually
reduced the land requirement, particularly with transmission and this for Munjal is “going to be the
biggest benefit” of hybrids.
Technicians on site

Atul Raaizada, senior VP projects and O&M, large wind and solar farms, Hero Future Energies, said
his team studied the wind project for three months before coming up with the hybrid concept,
learning how to minimise energy wastage when combining both wind and solar at the right levels.
Once the combination is understood, execution is easy, he said.
He also highlighted that this particular project location, which has consistently strong irradiation, is
both on hilly land, which is conducive to wind, and on barren land, therefore not impacting
agricultural production. This is “the best of everything”, he said.
The specific generation capacities were chosen to find the most suitable balance and minimise the
clipping (curtailment) of solar and wind, should their generation go above the 50MW evacuation limit,
said Raaizada. Having to find that right balance stemmed from being unable to regulate wind
generation due to the huge mechanical components in use.
A solo wind turbine

Module performance
An unsung benefit of hybrid systems is that by choosing a location with naturally high wind
resources, the temperature of the solar modules is also reduced by the breeze, thus increasing the
PV generation, said Raaizada.
Year-round lower temperatures on the solar panels from the wind also reduces the rate of
degradation in the modules.
Mounting the modules had to account for hilly terrain

Hybrid cost savings

Not only does the hybrid system share the transmission infrastructure, but the operations are also
shared by the same teams, thereby reducing costs even further.
However, operations and Maintenance (O&M) teams are different since the solar system requires
manual, water-based cleaning twice a month, in this extremely dusty region. Munjal said barren land
is naturally dusty, but there are two types of dust that impact solar. Dry dust, as in the arid, desert
state of Rajasthan, can be easily wiped off or blown off by the wind, but dust in humid conditions
tends to stick the panels, which can impact irradiation on the panels and cause soiling in the long-
term.

Energy storage lurking

The third hybrid of energy storage is a couple of years away from entering the mainstream in India

In its draft solar wind hybrid policy, Ministry of New and Renewable Energy (MNRE) had targeted
10GW by 2022. Following this, the state of Andhra Pradesh released a draft document outlining its
plans for 3GW of wind and solar hybrid projects by 2019/20. But while policy action stuttered since
these annoucments, the next stage after wind and solar hybrids, which introduces a third pillar in the
form of energy storage, seems to be progressing with its own momentum.
Andhra Pradesh authorities are already planning to tender a project involving 120MW of solar,
40MW of wind and 20-40MWh of storage this year. Meanwhile, Kerala’s Agency for Non-
Conventional Energy and Rural Technology (ANERT), is working on an experimental, technology
demo to include 3MW of solar, 4MW of wind, and battery storage.
Indian power minister R.K. Singh also recently chaired a meeting with battery-based energy storage
manufacturers calling on them to set up manufacturing units in India. His urgency stemmed not only
from the government’s push on electric vehicles (EVs) and its expected surge in the coming years,
but also because Singh said future tenders will cover hybrid solar and wind projects to be coupled
with energy storage.
Munjal said he believes that large-scale coupling with energy storage will proliferate in the next two
to three years. While price remains a problem, Hero is already using storage to benefit its own plants
but at a very small scale - carryng out studies with small batteries.
Raaizada said Hero is looking at future smoothing of the grid using storage and also releasing stored
energy at peak times on the grid.

More room for error

Inside a wind turbine

Karnataka was among the first states to take on new forecasting rules, following the example of
Tamil Nadu, so it requires plant operators to provide more frequent and accurate projections of
energy production or face penalties.
Rather than making this forecasting more challenging, the combination of overlapping of wind and
solar generation has actually increased the room for error, thus increasing the overall performance
of the project’s scheduling and forecasting.
Munjal said that forecasting software is also becoming more and more reliable, but while strict rules
on forecasting are necessary for the industry, how to penalise for non-compliance is up for debate.
“It has to be a three, four year programme,” He said. “Rome wasn’t built in a day - you cant expect
us to be perfect at it from day one. So some of the states which are more stringent than they should
be. While some states understand it and they are giving us a little bit of a breather and saying as
long as we see a positive correlation, we give you a couple of years to stabilise your systems.”
The problem is that developers rely on several sets of data: from NASA, satellite data, and third-
party software. Nonetheless, the hybrid project benefits actually negate the threat of unreliable data
and inaccurate readings.

India’s Hybrid future

Tendering is key, but pricing is hard

Looking at how India can drive wind solar hybrids into the mainstream, Munjal said: “We should start
a narrative where we should ask the government as the industry to come up with wind-solar hybrid
tenders.”
Existing Solar Park projects, where the government has been monitoring progress closely will be the
most suitable locations to add wind, while fresh tenders for new wind and solar together will be
easier to bid out and get a price for both sources together from scratch.
Vinay Rustagi, managing director of consultancy firm Bridge to India, told PV Tech: “There are two
main benefits of wind solar hybrids. The first one is, obviously, there is better and more efficient use
of the land and transmission infrastructure, so that reduces the capital cost by something like 5-7%
and that is parked through and results in overall lower tariff. So I think the Discoms and the power
purchaser should actually be keen on hybrid projects like this.
“The hybrid power project also makes the power output a little bit more reliable than a standalone
solar or standalone wind project so that again from a Discom's point of view or from a transmission
grid stability point of view should be actually better for the entire system.”
The benefits of hybrid renewables have been made clear and, if Munjal is correct, Hero Future
Energies' pioneering mark on the industry should see plenty more players following suite, but only
with private offtakers until a suitable government policy is released.
Sunil Jain, chief executive and executive director of Delhi-headquartered renewable energy developer Hero Future
Energies. Credit: Hero Future Energies

India's solar market had one of its first hiccups when module prices went up mid-way through last
year and since then several more uncertainties have hindered progress. PV Tech caught up with
Sunil Jain, chief executive and executive director of Delhi-headquartered renewable energy
developer, Hero Future Energies, to discuss power demand, safeguard threats, module pricing and
tender activity in India's utility-scale PV segment.
What is your take on the safeguard duty and potentially fresh anti-dumping threats looming
over the Indian solar sector right now?
Sunil Jain: A 70% tariff could make tariffs go up by 1.5 rupees (US$0.023), at a time when the
government wants cheap power. We believe that is not the right step for the market in the present
scenario, especially considering that government is a signatory of COP21.
Having said that, the government is duty bound to represent the domestic industry and so there are
two ways of protecting it. One is through anti-dumping measures, and the other is to incentivise the
local industry through some investment incentives or cash incentives.
Some form of incentive for domestic manufacturers could negate the need for anti-dumping duties
and allow PV tariffs to remain below three rupees. Continued low prices are important as India is
going into a power surplus situation and states are less willing to buy expensive power.
Recent utility-scale auctions have seen a recalibration of tariffs and lower interest – for what
reasons?
The Karnataka state bid, which was a district bid for 20MW projects each – to be very honest it
surprised me. The prices should have gone even higher than that.
Firstly, the bids are coming out in an election year and you have to commission those projects within
12 months, to avoid political risk. That's quite a challenge in Karnataka considering the land issues
and therefore it surprised me with people going so aggressive.
Secondly, there’s no certainty of the pricing of the modules. I do not see module pricing going down
substantially in the next 12 months, especially up to November, given that China has again
committed to putting up another 45-50GW this year – their cycle tends to peak during the second
quarter. So if people have to commission the projects by April next year, they have to start buying
modules before November, when prices are still high.
However, with anti-dumping measures in the US against the Chinese, the market needs volume and
the only volumes are coming from India right now. I’m not seeing any great volumes coming through
in other markets except one or two Gigawatts here and there – that’s all. Bigger volumes will come
from India, China and the US, so definitely I see a slight dip in module prices from November
onwards.
Secondly, the timelines were too aggressive and not only that, the module prices have not
softened – they are still rolling around 32 cents. This on top of GST, anti-dumping fears etc. It was
always going to be very high risk and I don’t see how lenders are going to look at it. However, the
industry has done well to send a message to say that these low tariffs are not sustainable in the long
run unless there are low panel prices and low equipment prices.
Despite recent uncertainties, are you positive about the long-term trajectory over the next 2-5
years?
What government is doing is well directed, there is no doubt of that, but please understand what is
the main issue – there is no power demand growth in the market. Ideally the elasticity ratio of energy
to the GDP growth is almost 1-to-1. I believe it has fallen down to 0.8. That’s the key issue and the
reason why is that the Indian economy GDP is growing more as a service industry rather than a
manufacturing industry. If you see the insurance sector, the BPOs, all that is going up. They are not
power hungry. Power hungry is manufacturing. Once manufacturing takes off, the demand for
energy will grow and therefore your demand for solar will definitely grow, because its such cheap
energy.
Today what is happening is the Discoms are lapping up this energy because for 25 years they are
getting it cheaper. They know the demand will go up and there are very few thermal power plants
coming up – only ones that were already in the pipeline.
India is a large country and the prime minister’s plan of 24/7 power for all by next year will give
another pump for the consumption of energy.
So achieving 60-70GW of solar target – leave the rooftop aside – can be done, but please
understand that any projects that have to be commissioned by March 2022, will have to be bid out
by 2019 or latest by early 2020. Therefore, you need to bid out some 30-40GW of projects in next 2-
3 years, which could be a challenge, but the ministry is doing a good job with several Gigawatts
already announced and more to come.
What do you make of the withdrawal of NLC India’s major solar-plus-storage tender, even
after an auction took place?
We are as an industry very disappointed, especially on the storage front. A lot of tenders with
storage have been cancelled and that does not send the right signal. My request to the government
is that it will be good if they can do their homework and detail first and then only come out with a
tender and whatever happens then it should be honoured. Otherwise I believe that the industry will
not go anywhere. The industry is ready for storage but if there is no proper policy in place I’m afraid
we will miss the bus.
Did you have interest in SECI’s consultation on 10GW of floating solar?
We will look at it. 10GW is ambitious. Again it boils down to what is the tariff. If today you are
struggling to buy power at 3 rupees, would somebody still offer 10GW of power purchase at 3.5 or 4
rupees? Floating solar is going to be more expensive
Rating Rationale
June 06, 2018 | Mumbai

Clean Solar Power (Hiriyur) Private Limited

Short term rating removed from 'Watch Developing' ; 'CRISIL A1+' assigned to CP

Rating Action
Total Bank Loan Facilities Rated Rs.1730 Crore (Enhanced from Rs.1430 Crore)

CRISIL A1+ (Removed from 'Rating Watch

Short Term Rating
with Developing Implications'; Rating reaffirmed)

Rs.250 Crore Commercial Paper CRISIL A1+ (Assigned)

1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has removed its rating on the short-term bank facility of Clean Solar Power (Hiriyur) Private Limited (CSPHPL), (as Hero Future Energies Pvt
(HFEPL) has merged with CSPHPL), from 'Rating Watch with Developing Implications' while reaffirming its rating at 'CRISIL A1+'. CRISIL has a
assigned its 'CRISIL A1+' rating to Rs.250 crore commercial paper facilities of CSPH

The ratings were placed on watch on April 4, 2018 following the amalgamation scheme of HFEPL with its subsidiary CSPHPL, and the Hero Grou
decision to restructure its renewable energy business. Post-merger, HFEPL now ceases to exist and CSPHPL is the merged entity, held by Hero Fut
Energies Asia Pte Ltd, a Singapore registered entity, which in turn is owned by Hero Future Energies Global P

CRISIL has now consolidated the business and financial risk profile of CSPHPL along with that of Hero Future Energies Asia Pte Ltd which has be
further consolidated into Hero Future Energies Global Plc. The consolidated entity is referred to Hero Future Energies Global group (HFE Global grou
CRISIL understands that HFE Global group will continue to receive managerial and financial support from the Hero group. The name of Clean Solar Pow
(Hiriyur) Pvt Ltd (CSPHPL) would also be changed back to Hero Future Energies Pvt Ltd within a ye

The rating continues to reflect expectation of financial, and managerial support from the Hero group and improvement in capitalisation and liquidity of H
Global Group as a result of equity infusion of USD 125 million (around Rs 850 crore) by International Finance Corporation (IFC) and IFC Glo
Infrastructure Fund1 . The strengths are partially offset by residual project execution risks and inherent risks associated with renewable energy projects.

Analytical Approach
For arriving at the rating, CRISIL has combined the business and financial risk profiles of CSPHPL and its wholly owned subsidiaries, Hero
Wind Energy Pvt Ltd (HWEPL) and Hero Solar Energy Pvt Ltd (HSEPL). CRISIL has also moderately integrated special purpose vehicles
(SPVs) established as subsidiaries of HWEPL and HSEPL for undertaking wind and solar energy projects, respectively.

The business and financial risk profile of CSPHPL has been further consolidated with that of Hero Future Energies Asia Pte Ltd which has
been further consolidated into Hero Future Energies Global Plc. The consolidated entity is referred to HFE Global group. Further CRISIL
has used its parent notch up framework to factor in the extent of support received to HFE Global group from the Hero group.

Key Rating Drivers & Detailed Description

Strengths
* Strong managerial and financial support from the Hero group
HFE Global group is jointly and majority owned directly or indirectly by the promoters of the Hero group, BCIPL and BMOP, which hold
20.00% and 13.99%, respectively, in Hero Motocorp Ltd (HMC; rated 'CRISIL AAA/FAAA/Stable/CRISIL A1+'). HFE Global group has all the
renewable energy projects undertaken by Hero group. CSPHPL holds 100% stake in two separate holding companies for wind and solar
energy. Equity requirement for renewable energy assets was funded by BMOP and BCIPL earlier, recently HFE Global group has relied on
external funds to meet these requirements. Though reliance on the Hero group to fund equity requirement of the SPVs has reduced, the
group will remain of strategic importance to Hero group and will continue to receive need-based support.

Also, the presence of members of the Munjal family on the group companies' board including CSPHPL, signifies the strong managerial
support derived from the Hero group; Munjal family members are expected to continue on the board representing majority participation.
CRISIL centrally factors in the financial and managerial support HFE Global group receives from the Hero group; therefore, any deterioration
in the credit profile of BCIPL and BMoP due to increase in debt will be closely monitored.

* Moderate financial risk profile

HFE Global group received the second tranche of total equity infusion of USD 125 million (around Rs 850 crore) from IFC in May 2018. This
helped liquidity improve significantly with gearing at 0.4 level as on May 30, 2018. Additionally, the HFE Global group has policy of not
leveraging beyond a total long term debt: equity ratio of 0.7 to 0.8 time.

Weaknesses
* Exposure to inherent risks associated with renewable energy generation
The plant load factor (PLF) for wind and solar power projects is exposed to variability in climatic conditions and equipment and evacuation
related risks. Given that the sensitivity of cash flow of a wind or solar power project is the highest for the PLF, these risks could severely
impair debt-servicing and free cash flows of such projects. Hence, CRISIL will continue to monitor the PLF, adequacy of cash accrual and
dividend paying capability of the SPVs as key rating sensitivity factors.

* Exposure to project risks associated with large wind and solar power capacity additions planned over the medium term
HFE Global group currently has over 450 MW of wind and solar power projects under various stages of implementation as of May 2018 out
of total portfolio of approximately 1550 MW. These projects are exposed to risks such as delays in land acquisition, financial closure, and
clearances, and power evacuation risks.

About the Company

CSPHPL is the green energy venture of the Hero group. The company, a jointly and indirectly majority owned 1A private equity fund
managed by IFC Asset Management Company. subsidiary of BCIPL and BMOP, was incorporated on October 18, 2012, as a
renewable energy developer operating/managing wind, solar, and small hydro plants. IFC along with IFC Global Infrastructure Fund
committed to infuse equity of USD 125 million (around Rs 850 crore) in HFE Global group in 2017. CSPHPL holds 100% stake in two
vertical holding companies for wind and solar energy. It is managed by a team of experienced professionals led by Mr Rahul Munjal and
Mr Sunil Jain. CSPHPL has already commissioned/implemented wind capacity of over 550 MW in Rajasthan, Maharashtra, Tamil Nadu,
Karnataka, Madhya Pradesh, and Andhra Pradesh and solar capacity of over 450 MW in Madhya Pradesh, Telangana and Karnataka.

CSPHPL was formed after amalgamation of erstwhile HFEPL with its subsidiary CSPHPL. CSHPL is a SPV which has implemented a 10
MW solar power project in Karnataka. The project achieved commercial operations in August 2015. It has signed a long term power
purchase agreement for supplying its entire capacity with Hubli Electricity Supply Company Ltd.

Key Financial Indicators (Standalone; CRISIL adjusted numbers)

As on / for the period ended March 31 Unit 2017 2016
Revenue Rs crore 74 44
Profit after tax (PAT) Rs crore 22 12
PAT margin % 29.7 27.9

Adjusted debt/adjusted networth Times 0.1 0.1

Interest coverage Times 3.5 5.2

Any other information: Not applicable

Rating Rationale
April 04, 2018 | Mumbai

Hero Future Energies Private Limited

Rating placed on 'Watch developing'

Rating Action
 Total Bank Loan Facilities Rated Rs.1430 Crore
CRISIL A1+ (Placed on 'Rating Watch with
Short Term Rating
Developing Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has placed its rating on the short-term bank facilities of Hero Future Energies Private Limited
(HFEPL) on 'Rating Watch with Developing Implications'.

The rating action follows approval by National Company Law Tribunal (NCLT) for amalgamation scheme
of HFEPL with its subsidiary Clean Solar Power (Hiriyur) Pvt Ltd (CSPHPL) and Hero Group's decision
to re-organize and restructure its renewable business. Post-merger, CRISIL understands that Hero
Group is expected to maintain control on the merged entity. CRISIL is in discussion with the
management to better assess the strength of the merged entity and continuation of financial and
managerial support to the merged entity under the revised name and organisational structure. CRISIL
will remove the rating from watch after getting clarity on these issues.

The rating continues to reflect expectation of financial, and managerial support from the Hero group and
improvement in capitalisation and liquidity of HFEPL as a result of equity infusion of USD 125 million
(around Rs 850 crore) by International Finance Corporation (IFC) and IFC Global Infrastructure Fund 1 .
The strengths are partially offset by residual project execution risks and inherent risks associated with
renewable energy projects.
Analytical Approach
For arriving at the rating, CRISIL has combined the business and financial risk profiles of HFEPL and
its wholly owned subsidiaries, Hero Wind Energy Pvt Ltd (HWEPL) and Hero Solar Energy Pvt Ltd
(HSEPL). CRISIL has also moderately integrated special purpose vehicles (SPVs) established as
subsidiaries of HWEPL and HSEPL for undertaking wind and solar energy projects, respectively.
Post-merger, CRISIL understands that the merged entity will maintain business operations as
earlier.
Key Rating Drivers & Detailed Description
Strengths
* Strong managerial and financial support from the Hero group
HFEPL is jointly and majority owned directly or indirectly by the promoters of the Hero group, BCIPL
and BMOP, which hold 20.00% and 13.99%, respectively, in Hero Motocorp Ltd (HMC; rated 'CRISIL
AAA/FAAA/Stable/CRISIL A1+'). HFEPL was the holding company for all the renewable energy
projects undertaken by Hero group. The company holds 100% stake in two separate holding
companies for wind and solar energy. The equity requirement for the renewable energy assets was
funded by BMOP and BCIPL earlier, recently HFEPL has relied on external funds to meet these
requirements. Though reliance on the Hero group to fund equity requirement of the SPVs has
reduced, the company will remain of strategic importance to the group and will continue to receive
need-based support.

Also, the presence of members of the Munjal family on the company's board signifies the strong
management support it derives from the Hero group; Munjal family members are expected to
continue on the board representing majority participation. CRISIL centrally factors in the financial
and managerial support HFEPL receives from the Hero group; therefore, any deterioration in the
credit profile of BCIPL and BMoP due to increase in debt will remain a key monitorable.

* Moderate financial risk profile

HFEPL had received first tranche of total equity infusion of USD 125 million (around Rs 850 crore)
by IFC in fiscal 2017. Second tranche of USD 75 million of the total equity infusion is expected to be
received shortly. This will result in significant improvement in capitalisation and liquidity and bring
leverage within HFEPL's policy of not leveraging beyond a total long term debt: equity ratio of 0.7 to
0.8 time.
Weaknesses
* Exposure to inherent risks associated with renewable energy generation
The plant load factor (PLF) for wind and solar power projects is exposed to variability in climatic
conditions and equipment and evacuation related risks. Given that the sensitivity of cash flow of a
wind or solar power project is the highest for the PLF, these risks could severely impair debt-
servicing and free cash flows of such projects. Hence, CRISIL will continue to monitor the PLF,
adequacy of cash accrual and dividend paying capability of the SPVs as key rating sensitivity
factors.

* Exposure to project risks associated with large wind and solar power capacity additions
planned over the medium term
HFEPL currently has around 618 MW of wind and solar power projects under various stages of
implementation as of February 2018. These projects are exposed to risks such as delays in land
acquisition, financial closure, and clearances, and power evacuation risks.

About the Company

HFEPL is the green energy venture of the Hero group. The company, a jointly and directly or indirectly
majority owned subsidiary of BCIPL and BMOP, was incorporated on October 18, 2012, as a renewable
energy developer operating/managing wind, solar, and small hydro plants. IFC along with IFC Global
Infrastructure Fund committed to infuse equity of USD 125 million (around Rs 850 crore) in HFEPL in
2017. The company holds 100% stake in two vertical holding companies for wind and solar energy. It is
managed by a team of experienced professionals led by Mr Rahul Munjal and Mr Sunil Jain. HFEPL has
already commissioned/implemented wind capacity of over 550 MW in Rajasthan, Maharashtra, Tamil
Nadu, Karnataka, Madhya Pradesh, and Andhra Pradesh and solar capacity of 450 MW in Madhya
Pradesh, Telangana and Karnataka.

HFEPL has received NCLT approval for amalgamation with its subsidiary Clean Solar Power (Hiriyur) Pvt
Ltd. CSHPL is a SPV which has implemented a 10 MW solar power project in Karnataka. The project
achieved commercial operations in August 2015. It has signed a long term power purchase agreement for
supplying its entire capacity with Hubli Electricity Supply Company Ltd.

1A private equity fund managed by IFC Asset Management Company.

As on / for the period ended

Unit 2017 2016
March 31
Revenue Rs crore 74 44
Profit after tax (PAT) Rs crore 22 12
PAT margin % 29.7 27.9
Adjusted debt/adjusted networth Times 0.1 0.1
Interest coverage Times 3.5 5.2
Key Financial Indicators of HFEPL (Standalone; CRISIL adjusted numbers)
Any other information: Not applicable