Plant load factors (PLFs) of coal-based power plants in India will improve to ~65 per cent this fiscal despite record renewable energy (RE) capacity addition, said a report by CRISIL Ratings. Healthy PLFs, it added, along with lower receivables and encouraging fuel supply will support the credit profiles of private coal-based generating companies (gencos).
The report further stated that over the past two fiscal years, demand for electricity has seen an annual growth of 8-9 per cent, driven by the post-pandemic economic rebound. During this period, 34 gigawatt (GW) of capacity has been added with 90 per cent of it in RE. In GW terms, this is a 9 per cent growth in power capacities but on normative terms this was only 4-5 per cent growth as capacities operates at varying PLFs and in this incremental supply, coal-based power plants remain an important cog, accounting for 69-71 per cent of total power generation because of the intermittent nature of RE with lower PLFs.
“The trend will likely continue this fiscal. Power demand is seen growing 5-6 per cent, and a part of the incremental requirement will be met by the newly added RE capacities — including 18 GW in wind and solar, the highest ever. That said, a good portion of the incremental generation will be met by existing coal-based power plants. This will prove beneficial for thermal PLFs, which are likely to improve by 100 basis points (bps) to over 65 per cent in fiscal 2024, as no material coal-based capacity is envisaged this fiscal and relatively low-capacity addition of hydro, biomass and nuclear,” said Ankit Hakhu, Director, CRISIL Ratings.
The report highlighted that the higher PLFs will continue to be supported by conducive fuel supply as domestic coal production, building upon its record high of 893 million tonne (MT) last fiscal, is on track to achieve 11-13 per cent growth projected for this fiscal. Moreover, coal allocation under various e-auction modes has notably improved. Evacuation infrastructure has also witnessed augmentation with railway rakes for coal transportation 8 per cent higher on-year.
In addition, it said that the cash flows will be supported by release of receivables under the Late Payment Surcharge (LPS) scheme notified by the government in June 2022. Receivables of private gencos rated by CRISIL Ratings are estimated to reduce from 82 days as of March 2022 to 55-60 days by the end of this fiscal.
“Overall, we expect coal-based power plants rated by us to witness over 20 per cent on-year rise in cash flow from operations (CFO) this fiscal. Consequently, CFO to total debt for these power plants will improve from 11 per cent as on March 31, 2023, to an estimated ~15 per cent as on March 31, 2024,” said Mithun Vyas, Team Leader, CRISIL Ratings.
This improvement, CRISIL added, is in making since the last couple of years after a period of distress, plagued by lower PLFs, limited coal access, and stuck receivables. “While these parameters are on a better footing now, their sustainability and the pace of rollout of RE capacities will bear watching over the medium term. Till then, utilization of surplus cash flows towards deleveraging will benefit the credit profiles of those coal-based power plants, which create balance-sheet cushions,” it said.
