Energy & Infrastructure

Renewable platforms, SPV portfolios, and infrastructure developers reporting to lenders and investors.

Long-lived assets and project finance turn each accounting judgement into a decision that lasts for decades.

Renewable energy and infrastructure groups are portfolios of special purpose vehicles, each with its own project debt, land arrangements, offtake agreement, and lender covenants. The accounting has to work entity by entity and again on consolidation.

Its readers are lenders, investors, and buyers of operating assets, and they read closely. We have converted a multi-SPV renewable platform to Ind AS, and audited a stake sale in the sector.

On the agenda

Conversion

Adopting IFRS-based standards across a portfolio of SPVs

Ind AS, India’s IFRS-converged framework, applies across a group once the holding company comes within its scope, so subsidiaries, associates, and joint ventures follow. A portfolio of SPVs therefore converts at the same time, and the opening balance sheet adjustments and first-time adoption elections, made under IFRS 1 as adopted in Ind AS 101, have to be consistent across every entity and with the consolidated statements.

Inconsistent elections, such as using deemed cost for property, plant and equipment in some SPVs and not in others, are hard to explain and expensive to unwind.

Leases and provisions

Land leases, right-of-use assets, and restoration obligations

Project land is often leased for the life of the plant. Under IFRS 16 (Ind AS 116), those leases create right-of-use assets and lease liabilities measured at incremental borrowing rates that should reflect long tenors and project-level credit, not the group’s working capital rate.

Obligations to restore land at the end of a project create decommissioning provisions under IAS 37 (Ind AS 37). They are capitalised into the asset and unwound as a finance cost over decades.

Financing

Project debt, effective interest, and covenants

Upfront fees, refinancing, and hedging change the carrying amount of project debt under the effective interest method. Borrowing costs incurred during construction are capitalised under IAS 23 (Ind AS 23) until the asset is ready for its intended use.

Debt service coverage and similar covenants are tested on reported numbers, so accounting choices have financing consequences and should be modelled before they are made.

Transactions

Stake sales and platform acquisitions

Sales of operating SPVs, partial stake sales, and platform acquisitions raise three questions with a large effect on the reported gain: whether a business or a group of assets changed hands, whether control was lost, and at what fair value any retained interest is remeasured.