Coal-based thermal power units are anticipated to experience an enhancement in their plant load factor (PLF) or capacity utilization to 65 percent during the current fiscal year, despite significant additions to renewable energy capacity, as reported by Crisil Ratings.

Crisil Ratings conveyed that robust PLFs, coupled with reduced outstanding payments and favorable fuel supply, will provide support to the credit profiles of private coal-based power generating companies. They highlighted an expected increase in the PLFs of coal-based power plants in India to 65 percent in the ongoing fiscal, even with the substantial addition of renewable energy (RE) capacity.

The agency pointed out that over the past two fiscal years, electricity demand exhibited a strong annual growth of 8-9 percent, primarily attributed to the post-pandemic economic resurgence. Within this period, around 34 gigawatts (GW) of capacity has been added, with approximately 90 percent of it stemming from RE sources.

Despite a significant increase in power capacities by 9 percent in GW terms, the agency noted that in normative terms, this growth was around 4-5 percent due to varying PLFs of capacities. Consequently, coal-based power plants remain crucial, contributing 69-71 percent to total power generation due to the intermittent nature of RE, resulting in lower PLFs.

Ankit Hakhu, Director at Crisil Ratings, stated that while power demand is expected to grow by 5-6 percent, a substantial portion of the additional requirement will be met by the newly installed RE capacities, including a record-high addition of 18 GW in wind and solar energy. However, existing coal-based power plants will cater to a significant share of the incremental generation.

The projection suggests an encouraging outlook for thermal PLFs, anticipating an increase by 100 basis points (bps) to surpass 65 percent in the fiscal year 2024. This improvement is expected due to the absence of substantial coal-based capacity additions and relatively limited capacity enhancements in hydro, biomass, and nuclear sectors during this fiscal year.

Mithun Vyas, Team Leader at Crisil Ratings, highlighted that they anticipate coal-based power plants, under their rating, to witness a more than 20 percent year-on-year increase in cash flow from operations (CFO) in the ongoing fiscal year. Consequently, the CFO to total debt ratio for these power plants is projected to improve from 11 percent as of March 31, 2023, to an estimated 15 percent by March 31, 2024.