Lockdown constraints amid second wave of Covid-19 a downside risk for electricity demand: ICRA
A large portion of the private IPP capacity (20 GW) is exposed to volume and pricing risks in the short-term market.
New Delhi: The proliferation of lockdown restrictions across many states in the country, amid the second wave of Covid-19 infections, could adversely impact the electricity demand growth prospects in FY2022, rating agency ICRA said.
Based on the data available from POSOCO for April 1 to April 25, 2021, the electricity demand is higher by 40.4 per cent on a YoY basis, considering the favourable base effect, given the impact of the all-India lockdown on electricity demand in April 2020.
However, the average daily demand has slowed down from 4071 MUs (YoY growth of 48 per cent) during the first 10 days of April 2021 to 3923 MUs (YoY growth of 35 per cent) during the subsequent 15 days, considering the rising Covid-19 infections and the consequent restrictions being imposed by various state governments, the agency said.
ICRA group head and senior vice president (corporate ratings) Sabyasachi Majumdar said, “A prolonged second wave of Covid-19 infections and its impact on demand, particularly from the commercial & industrial segment in key industrialised states, remains a key downside risk for our earlier forecast of 6-7 per cent growth in electricity demand in FY2022.
This forecast of demand growth was driven by a favourable base effect, with demand witnessing a YoY decline of 1.1 per cent in FY2021 and the expected recovery in demand from the C&I segments.
The impact of a lower demand growth would be more pronounced on the thermal generation and distribution segments, considering the subdued thermal PLFs, exposure to short-term power market for thermal IPPs and the loss of revenue from high tariff-paying C&I customers for distribution utilities.”
The all-India thermal PLF declined to 54.5 per cent in FY2021 from 56.0 per cent in FY2020, given the decline in electricity demand. While the PLF is expected to improve to 58.0 per cent in FY2022 on the back of the recovery in demand growth, the PLF levels continue to be subdued.
Also, a large portion of the private IPP capacity (20 GW) is exposed to volume and pricing risks in the short-term market.
While the spot power tariffs on the Indian Energy Exchange witnessed a recovery to Rs 4.1 per unit in March 2021 from less than Rs 3 per unit in 9M FY2021, the prices have slightly moderated to Rs 3.7 per unit in April 2021 (till April 25).
The spot power tariffs are likely to remain in the range of Rs 3.0 – 3.5 per unit in the near term. Given the subdued thermal PLFs, lack of visibility in signing of new power purchase agreements (PPAs) for thermal IPPs and modest tariffs in the short-term power market, the credit outlook on the private thermal power segment remains negative, it said.
ICRA co-group head and vice president (corporate ratings) Girishkumar Kadam said, “The lockdown restrictions could impact the demand and collections for the power distribution segment, mainly from the high tariff-paying C&I customers.
Moreover, this could also delay the issuance of tariff orders and tariff revisions for the state distribution utilities, in the backdrop of large revenue loss and lack of tariff revisions in FY2021, as reflected from the median tariff hike of less than 1 per cent.
ICRA’s outlook for the distribution segment remains Negative given the continued weakness in the financial position of most state distribution utilities amid the operating inefficiencies and inadequate tariffs.”
On the other hand, the impact is likely to be relatively low for the renewable IPPs, given the must-run status for these plants. However, the localised stricter lockdown restrictions may increase the execution challenges in terms of labour availability and supply chain for under-construction wind and solar power projects, ICRA said.
This may lead to delays in project execution. Also, the projects which are exposed to weaker counter-parties could face the risk of higher delays in receiving payments in the near term.
However, such an impact is expected to remain limited for power transmission projects with the presence of availability-linked payments and presence of a pooling-based payment mechanism managed by the central transmission utility for inter-state transmission projects. In line with this, ICRA’s outlook remains Stable for renewable energy and transmission segments, it said.
Source: ET Bureau
