Moody’s upgrades power sector outlook from negative to stable

Moody’s Investors Service has upgraded the outlook for the Indian power sector from ‘negative’ to ‘stable’ as the country recorded the fifth consecutive month of power generation growth (on a year-on-year basis) in January, after six months of decline driven by coronavirus pandemic. In the first ten months of FY21, power generation growth declined 2.9% year-on-year, compared to the rating agency’s earlier expectations of a 4-5% decline in FY21.

“We do not expect any further material deterioration in the cash conversion cycle for the power companies from current levels, which also supports the change in outlook,” Moody’s said in a statement. Peak power demand has recently touched a new record of more than 1,85,000 mega-watt (MW), signalling a spurt in commercial and industrial activities as businesses go through a “reset” phase after the lifting of lockdown curbs in recent months.

“Our expectations of a rebound in India’s real GDP growth to 10.8% in FY22, after a sharp contraction in FY21, further underpins the potential for improving growth in power demand and a more stable picture for the sector,” said Moody’s.