Moody’s maintains stable outlook for power sector, know the reason

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Published: December 10, 2019 5:05:21 AM

In its latest ‘Asia-Pacific 2020 outlook’ for the sector, Moody’s also noted that “easing constraints on fuel supply” have also helped the Indian electricity generators.

Moodys, Union power ministry, NHPC, NTPC, Adani Renewable Energy, Moodys Investors Service, power sector in India, GDP ratioMoody’s also noted that changes in sovereign outlook are adversely affecting Indian power utilities such as NTPC, Power Grid Corporation, NHPC and Adani Renewable Energy.

Global rating agency Moody’s has said it expects an overall supportive business environment for the power sector in India and has maintained a stable outlook for the industry. Referring to the recently implemented ‘letter of credit’ mechanism of the Union power ministry, the agency noted that the tariff reforms allowing timely recovery
of costs are seen to be incentivising private investment in the sector.

In its latest ‘Asia-Pacific 2020 outlook’ for the sector, Moody’s also noted that “easing constraints on fuel supply” have also helped the Indian electricity generators. Currently, power plants are sufficiently stocked with coal which can last them for as many as 16 days.

The fuel reserves had critically come down to nine days in the same period last year. Most rated power issuers in the country are under “steady availability-based regulated return regimes and will not be affected by power demand slowdown”, it pointed out. However, it flagged the deterioration in the financial health of state electricity boards as one of the factors which continues to pose a challenge to the sector’s development.

Moody’s also noted that changes in sovereign outlook are adversely affecting Indian power utilities such as NTPC, Power Grid Corporation, NHPC and Adani Renewable Energy. Moody’s Investors Service last month had cut its forecast for India’s 2019 (calendar) GDP growth by 60 bps to 5.6%, in what reflected a continuing trend of such downward revisions by prominent domestic and foreign agencies.

The agency had cut its rating outlook for India to negative, citing, inter alia, lower policy and government effectiveness in addressing the economic slowdown and higher debt to GDP ratio. “As the share of renewables grows, the key regulatory challenge in the long run will be to balance new renewable capacity with protecting existing coal-fired units,” it has said.  The country is trying to achieve the national target of 175 GW of renewables capacity by 2022. Currently, there are around 85 GW of such generation units.

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