Poor de­mand to keep pri­vate power pro­duc­ers un­der stress in medium term

NBM&CW - - POWER SECTOR - Rahul Prithi­ani,

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

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