Ind-Ra keeps ‘neutral’ outlook for power sector; demand growth to return

Ind-Ra has maintained a ‘neutral’ outlook for the power sector for FY23 and expects the demand growth to come back to a normal level of 6 to 7 per cent in the next fiscal year.

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India Ratings | Ind-Ra | Power Sector

India Ratings and Research (Ind-Ra) has maintained a ‘neutral’ outlook for the power sector for FY23 and expects the demand growth to come back to a normal level of 6 to 7 per cent in the next fiscal year.

India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the power sector for FY23, as it believes the overall plant load factor (PLF) of thermal power plants would continue to improve and reach closer to 60 per cent in FY23,” an Ind-Ra statement said.

The improvement in PLF is largely due to the consistent growth in power demand and continued dependence on coal-based generation in the absence of any major increase in the capacity additions in any other sector except renewables, it added.

Further, Ind-Ra expects the demand growth to come back to a normal level of 6 to 7 per cent in FY23, given a higher base.

The impact of third COVID wave remains lower on power demand, given the less stringent curbs imposed by local/state governments, although any stringent lockdowns in case of the emergence of any strong COVID wave could derail the growth in power demand, it noted.

The domestic coal availability to the power sector would remain dependent on an improvement in the domestic coal production and its allocation to the power sector, both of which improved in 9MFY22 (April to December 2021).

Furthermore, the weak financial profile of distribution companies (discoms), reflected in increasing overdues even after liquidity injections by the government of India, it said.

The government assistance of Rs 3.05 lakh crore for improving discoms infrastructure including smart metering and upgradation of systems should result in reduction in aggregate, technical and commercial losses, Ind-Ra said, adding that “implementation remains key”.

The renewable capacity addition increased to 10GW in 9MFY22 from 4GW in the corresponding period of the previous fiscal. However, Ind-Ra believes that it is likely to moderate again intermittently on account of high panel prices along with issues in timely availability of imported solar panels.

The module prices are likely to remain elevated over FY23, and given the supply-chain constraints and order backlogs, the supply of modules is likely to remain constrained, impacting the capacity addition in India, it noted.

According to Ind-Ra the energy transition in terms of increasing generation from renewable sources would continue and increase by 125-150bp annually till FY25.

Furthermore, the impetus to fasten the energy transition would require technologies such as battery storage and green hydrogen, to be viable for commercial scale, it added.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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