Moody’s Investor Service maintained its negative outlook on India’s power sector, even as the rest of Asia-Pacific continued to be stable.
The chief reasons for the unfavourable forecast were uncertainty about demand revival and delayed payments from State-owned distribution companies.
Talking about India, the rating agency said in its report, “Cash conversion cycle for power companies may continue to remain under pressure with weakening in state government finances and slower economic growth.”
In May earlier this year, Moody’s had downgraded the Indian power sector’s outlook from stable to negative citing Covid-induced disruption that would lead to an economic slowdown.
It cited three reasons in particular that led to the downgrade: weak power demand, further payment delays by DISCOMs, and policy measures aimed at reducing stress for end users.
However, Moody’s noted that regulatory changes such as the Ujwal DISCOM Assurance Yojana (UDAY) scheme improved off-taker credit profiles, generating a return-on-equity of 15.5%.
“This provides visibility for rated regulated issuers but state-owned distribution companies will likely delay tariff payments to power producers and transmission companies over the next 12 months as a result of coronavirus disruptions,” it added.
Talking about the renewable energy sector, Moody’s Investor Service said that India will play a leading role in contributing to Asia-Pacific’s installed capacity in the next 12 to 18 months.
“In particular, renewable projects in China and India enjoy priority in power dispatch, which significantly reduces demand risks. Renewable projects in India typically have long-term power purchase agreements with fixed tariffs,” it said.
It further added said that new renewable energy projects in India had already achieved grid parity on course with coal-powered power plants. “Generation costs, as measured by the levelized cost of energy (LCOE), can match coal-fired power over the project lifetime,” the report stated.
Source: economictimes.indiatimes
