1. Home
  2. Featured
  3. Muted power demand growth to delay PLF recovery, discom dues on the rise
Muted power demand growth to delay PLF recovery, discom dues on the rise

Muted power demand growth to delay PLF recovery, discom dues on the rise

0
0

This is due to limited improvement in the financial profile of distribution companies (discoms) since the launch of the Financial Restructuring Plan and Ujwal Discom Assurance Yojana (UDAY).

Mumbai: India Ratings and Research (Ind-Ra) has revised the power sector outlook to negative for FY21 from stable-to-negative on account of muted growth in electricity demand and rising discoms dues.

This is due to limited improvement in the financial profile of distribution companies (discoms) since the launch of the Financial Restructuring Plan and Ujwal Discom Assurance Yojana (UDAY).

Weakening consumer sentiments because of declining GDP growth can result in subdued power demand for FY21, it said. However, profitability is likely to remain unaffected due to the regulated nature of operations for most of the entities.

Ind-Ra said the rising discom dues are expected to result in an elevated leverage level for the sector. The discom resolution plans have provided lower-than-anticipated benefits, and hence the focus can shift to the privatisation of discoms either through franchisee model or licensee model.

Ind-Ra estimated a continued muted outlook for thermal plant load factor (PLF 9M FY20: 55.2 per cent) and expects it to remain below 60 per cent for FY21.

Unlike few other developed global economies which have transitioned away from coal to gas and renewables, India will, however, remain dependent on coal.

The low expected PLFs, lack of strong balance sheets in the sector, limited appetite of discoms to tie-up long-term power purchase agreements and low project returns will continue to prevent any major fresh project coming up in the thermal sector.

Ind-Ra expects the renewable capacity addition to remain slow in FY21 on account of lower equity internal rate of returns generated by operational plants, limited domestic long-term funding availability post non-banking financial company crisis, continued poor health of discoms, and continuing infrastructure challenges on land acquisition and evacuation infrastructure.

Ind-Ra estimated the additions to solar capacity to remain at 5 to 7 gigawatt annually (9M FY20: 5.5 GW, FY19: 6.5 GW, FY18: 9.4 GW) which is healthier than the additions in wind.

Ind-Ra opined that resolution of the stressed thermal assets will remain slow as there are only a few commissioned assets left with significant tie-ups on fuel and power purchase agreements, which may see resolution during the coming year.

About 16 GW of under-construction capacity has not seen any resolution till date and is likely to remain a challenge due to issues related to the settlement of past capex dues.

This capacity, as per Ind-Ra, will remain stressed for a longer period or may find resolution under the National Company Law Tribunal only.

Source: ANI
tags:
Anand Gupta Editor - EQ Int'l Media Network

LEAVE YOUR COMMENT

Your email address will not be published. Required fields are marked *