The plant load factor (PLF) of Indian coal based power plants will improve over 300 basis points (bps) to 62% this fiscal the highest in the past five fiscals fuelled by strong demand growth and limited capacity addition in the sector, a CRISIL Ratings estimate shows. This will help improve the credit risk profiles of one-third (25 GW) capacities of private generating companies (gencos) the most, with their operating profit expected to touch a five-year peak, it said.
Annual power demand recovered sharply last fiscal, rising 8.2% on-year, tracking the 8.7% growth in gross domestic product (GDP) as the pandemic impact eased. This fiscal, with GDP growth expected at 7.3%, power demand is likely to rise over 6% year-on-year given the high correlation between GDP growth and power demand growth.
However, capacity addition remains low compared with demand growth. Coal gencos added just 2% capacity annually in the past five years vis-à-vis annualised demand growth of 3.4% and may add 3.5% (7 GW) this fiscal against demand growth of over 6%, it said.
Manish Gupta, Senior Director, CRISIL Ratings, said, “Private players are averse to adding coal-based capacities (none in the past five years) with an eye on renewable power. This aligns with the government’s plan to ramp up renewable generation5 to meet 50% of the cumulative demand by 20306. However, renewable addition will meet barely a third of the incremental demand, in fiscal 2023, and the onus will be on coal gencos to fill the gap. This will power their PLFs to a five-year high of 62% this fiscal, building on their fortunes last fiscal.”
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