PLFs of power plants to remain at 22 year low: Ind-Ra

Plant load factors (PLFs) of power companies are unlikely improve in FY17 from the 61.7 per cent in 9MFY16, despite improving fuel supply since demand growth for electricity is expected to stay muted says India Ratings & Research (Ind-Ra). All India thermal plant PLFs have been consistently declining and have fallen 21.5 per cent since the peak of 78.6 per cent in FY08. Ind-Ra expects electricity demand to grow by 4-5 per cent and power generation growth of 5-6 per cent in FY17, with deficits remaining low at 3-4 per cent. India has added 80GW of coal based generation capacity over FY11-FY15, which gives room for higher generation given the improvement in domestic coal supply and low international coal prices. Industrial demand however which constitutes 40 per cent of the demand has witnessed a muted growth. Moreover, the current focus on use of efficient devices (LEDs and agricultural pumps) is leading to lower demand. In the Corporate Outlook FY17 a recent report released on 1 February 2016 Ind-Ra Has maintained a stable-to-negative outlook on power sector for FY17. Ind-Ra has also maintained a Stable outlook on most of its rated power sector entities for FY17, as the agency expects its rated entities will continue to manage fuel and state power utilities risks due to a favourable tariff mechanism, their comfortable liquidity and support from the central and state governments. Lower PLFs have resulted in lower incentives for regulated generators as their incentives for the control period FY15-FY19 have been linked to PLF, compared to the earlier availability based incentive. Additionally, a low PLF would lead to lower than benchmark operating parameters for station heat rate and secondary fuel consumption thus lowering the overall plant efficiency. Financially weak discoms have preferred load shedding rather than supplying power to the consumers, as they are incurring losses on every unit of power supplied as reflected in the revenue gap of Rs 1.14/kwh in FY14.