New Delhi: Rating agency CRISILbelieves that thermal powercapacity additions may halve over the next five years on truant power purchase agreements, erratic coal supplies and rise in renewables.

Capacity addition in power generation is expected to slow down to 35 GW (excluding renewables) between fiscals 2019 and 2023, compared with 88 GW added over the past five years, believes CRISIL.

Consequently, a large number of projects that are at a nascent stage are likely to get postponed until the demand situation improves significantly. Moreover, fresh project announcements are limited as players are opting for the inorganic route for expansion, as a number of assets are available at reasonable valuations.

The private sector will bear the brunt as large capacities of private sector projects under construction are stuck due to financial problems faced by promoters. Lenders are reluctant to extend further capital as the future of these projects is uncertain given the circumstances. Hence, a considerable number of under-construction capacities face a potential liquidation risk over the forecast period.

Power demand clocked a compound annual growth rate (CAGR) of 3.8 per cent over the last five years, riding on improvement in energy efficiency and reduction in transmission and distribution (T&D) losses, but power cuts and load shedding also rose in tandem due to weak financial health of discoms and lack of intensive electrification.

Over the next five fiscals (2019 through 2023), however, CRISIL Research expects power demand to rise to a CAGR of 6.5-6.8 per cent. High latent demand, rapid urbanisation, and government’s thrust on rural electrification will spur robust residential demand for power.

Industrial demand, though, will grow at a moderate pace in line with growth in the gross domestic product (GDP) and gradual pick-up in economic activity.