Poor demand to keep private power producers under stress in medium term
TDirector, CRISIL Research
he irony couldn’t be starker: for a country where significant stretches remain untouched by electricity, leave alone enjoy uninterrupted power. Power producers are battling a glut.
Recent years have seen aggressive capacity additions, led by the private sector. Between fiscal years 2013 and 2017, installed capacity saw a compound annual growth rate of 10%, with a whopping 130 GW (including renewables capacity) added.
However, power demand grew at a tepid 4% a year, given weak financial health of distribution companies (discoms) which restricted their power off-take ability, sluggish industrial growth, and rising energy efficiency measures taken by the government.
Not surprisingly, the average plant load factor (PLF) for thermal plants fell to 60% last fiscal from 70% in 2013. It was even lower for the private sector – for these producers, PLFs were at 56% last fiscal.
This has put the generation companies in a fix. The duress is more in the private sector, which added 87 GW of capacity between 2009 and 2017, a chunk of it without adequate offtake and fuel arrangements.
Sans off-take duress continues for private producers
The power procurement structure is also undergoing a shift. Given their weak financial position and uncertain sales growth projections, as well as low electricity prices in short term market (owing to oversupply situation), discoms are preferring short / medium term procurement instead of longterm PPAs. The increasing share of intermittent renewable energy and rise in industrial open access consumption only bolster that decision. Hence, there are very few long term PPAs.
This heaps financial on power producers with stress untied