Fitch Reaffirms JSW Hydro’s USD Notes at BB+ with Stable Outlook, Citing Strong Project Fundamentals

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Fitch Ratings has reaffirmed the BB+ rating for JSW Hydro Energy Limited’s USD 707 million senior secured notes due 2031, maintaining a stable outlook. The rating reflects the company’s robust operational performance, regulatory support, and low hydrology risk, while acknowledging refinancing uncertainties and systemic exposure to state-run power distribution companies.

Key rating insights and operational strengths

- JSW Hydro operates two major hydropower plants in Himachal Pradesh: the 1,091 MW Karcham Wangtoo project on the Satluj River and the 300 MW Baspa II project on the Baspa River
- Both plants are fully operational and benefit from a cost-plus regulatory framework that ensures fixed cost recovery if benchmark availability is met
- The plants have consistently exceeded their design energy generation targets, with no hydrology or curtailment risk due to take-or-pay contracts and must-run status
- The company’s in-house operations and maintenance team has maintained high plant availability, supported by comprehensive industrial all-risk insurance coverage

Risk considerations and rating constraints

- The BB+ rating is constrained by uncertainties surrounding future debt refinancing terms and exposure to payment delays from state-owned distribution companies
- Although the financial profile of the project portfolio is stronger than typical BB+ credits, systemic risks and lack of a maintenance reserve account limit upward rating movement
- Operating costs are not validated by an independent technical advisor, which also contributes to the midrange operational risk assessment

Strategic context and future outlook

- The reaffirmation underscores Fitch’s confidence in JSW Hydro’s long-term viability, backed by stable cash flows and strong contractual arrangements
- The stable outlook reflects expectations of continued operational reliability and regulatory support, with no material deterioration in credit metrics
- JSW Hydro’s performance will remain closely tied to India’s evolving power sector dynamics, particularly in renewable integration and distribution reforms

Sources: Fitch Ratings, JSW Energy Ltd. Exchange Filing, T&D India.