slow resolution of stressed assets, coal woes Jan 24, 2019
Posted On : February 20, 2019| The overall outlook for the power sector for the next financial year is negative owing to a host of factors including delays in the resolution of stressed assetsand coal supply woes, according to India Ratings and Research. The Fitch Group arm in a statement on Wednesday said this is despite the anticipation of a 6 per cent to 7 per cent growth in power demand and an improvement in all India coal-based plant load factors (PLFs) to 62 per cent to 63 per cent. “The stable-to-negative outlook continues to reflect Ind-Ra’s expectation of a slower-than-expected resolution of the stressed capacity, domestic coal availability challenges, and limited appetite of discoms to sign long-term power purchase agreements,” the ratings agency said. It further added that the draft Central Electricity Regulatory Commission (CERC) guidelines came as a relief to generators. However, the overhang of the stressed capacity would continue to prevent fresh thermal capacity addition from the private sector. The renewable sector would continue to account for bulk of the incremental capacity addition in the coming years, it said. Brand Solutions5 Simple Steps to Maximize your AMI Software StakePerfecting the next Generation Utility PlatformAccording to Ind-Ra, the transmission sector would continue to see investments in view of the various government schemes as part of its goal of ‘24x7 Power for All’. However, for a large number of discoms, the actual aggregate transmission and commercial (AT&C) loss remains higher than the target set under the UDAY scheme, leading to lower-than-expected reduction in overall loss.It further added that timely and adequate tariff hikes would remain essential for a reduction in overall losses. Ind-Ra expects the coal-based thermal capacity PLFs to improve further to about 63.5 per cent in FY20, driven by healthy electricity demand. And also said that incremental generation from coal-based thermal capacity would increase in FY20 to meet the rising demand. The rise in coal-based capacity PLFs is contingent upon coal availability. The ratings agency believes continued production growth rate of 7 per cent to 8 per cent might be difficult to achieve in FY20, which would result in increased reliance on imported coal. Solar capacity addition would remain flattish in FY20, given the tariff ceiling proposed by Solar Energy Corporation of India Ltd for solar in a rising costs scenario. “Ind-Ra does not expect solar tariffs to decline below Rs 2.44 per unit,” it said. About 2.4 gigawatt (GW) of central and 1.5 GW of state sector bids were scrapped in 2018 due to higher tariffs. On the wind side, capacity addition remained low at only 600 MW in the six months ended September 2018. According to the research agency, the pace of resolution of the stressed thermal capacities continues to be slow, with actual resolution of about 2 GW only so far. “Clearly, buyers remain focussed on assets that have significant tie-ups on fuel supply and long-term power purchase agreements. The resolution also remains slow due to significant hair-cuts being suggested, presence of multiple lenders and issues related to the settlement of past capex dues for the under-construction capacity,” it said. Ind-Ra said that the recent recommendations of the high powered committee for the resolution of coastal ultra-mega power projects, and the ultimate resolution thereafter, if implemented successfully, might boost the PLFs for these plants, as they would see a sharp reduction in losses |
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