Falling plant utilisation continues to be a key problem for power generators
India´s power generators continue to face low and declining capacity utilisation, mainly because financially stressed power-distribution companies are unable to purchase power. This underscores the importance of successfully addressing the power distributors´ financial health.
For the first half of the financial year ending March 2016, the overall coal-fired plant load factor (PLF) in India fell 3.2 pecentage point (pp) YoY to 60 per cent, with that of central-government-owned generation companies (gencos) falling 1pp YoY to 72 per cent, state gencos´ falling 5pp to 55 per cent and private gencos´ down 2.3pp to 57 per cent.
The country´s gas-based PLF for the period was unchanged at a low level of around 22 per cent. The 7pp increase in private gencos´ PLF to 19 per cent was offset by the 5.3pp drop in central gencos´ PLF to 23 per cent and a 2.9pp fall for state gencos to 23 per cent. It is primarily fuel unavailability that led to gas-based capacity either stranded or operating at grossly sub-optimal levels.
Separately, the country´s thermal power-generation capacity has increased by an impressive 11 per cent over the last year to 194 GW at end-September 2015, driven by the addition of coal-fired power plants and privately owned facilities.
What to Watch
Performance of Distributors: The government´s revival package introduced in November 2015 for the distressed distribution companies will provide some breathing space, but successful implementation of adequate and timely tariff hikes, and lower aggregate technical and commercial (AT&C) losses will be essential to sustain structural improvement.
Increase in Leverage: Fitch expects NTPC Limited (BBB-/Stable), NHPC Limited (BBB-/Stable) and Power Grid Corporation of India Ltd (PGCIL, BBB-/Stable) to incur significant expansionary investments over the next few years. This will keep their financial leverages elevated.
Ratings Impact: Neutral for Rated
Ratings of NTPC, NHPC and PGCIL are supported by dominant market positions, moderate to high linkages with the Indian state, regulated business models and well-managed counterparty risks.
NTPC´s incentives are now pegged to PLF instead of plant availability factor (PAF), but the change will not be significant as even its PAF-linked incentive income accounted for only around 1 per cent of FY10-FY14 total revenue. Incentives for NHPC and PGCIL continue to be linked to normative PAFs.
Associate Director, APAC Energy & Utilities
Director, APAC Energy & Utilities
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