Power demand growth at 6.2% in 12th Plan: Crisil
The demand for power during the 12th Plan period (2012-17) is expected to be a low 6.2 percent due to lower demand from the industrial and commercial segments on account of muted GDP growth.
June 06, 2013 / 11:16 IST
Tepid demand from industrial and commercial segments will result in electricity generation companies facing pressure on returns during the 12th Planm period, leading to slower growth, Crisil said on Wednesday.
“The demand for power during the 12th Plan period (2012-17) is expected to be a low 6.2 percent due to lower demand from the industrial and commercial segments on account of muted GDP growth," Crisil senior director for industry and customised research Prasad Koparkar said on a conference call.However, this demand will be better than the 11th Plan period, mainly due to increase in capacity and better financial position of state electricity boards (SEBs) on the back of steep tariff increases and significant reduction in interest costs with the financial restructuring of the state boards. Crisil expects as much as 68,000 MW capacity to be added during the 12th Plan, which is, however, much lower than the estimated target of around 88,000 MW of the government for the period. He said though the demand from the industrial and commercial segments will be low, domestic demand is expected to grow during the period. "Industrial and commercial demand growth will be slow and follow GDP growth, but household demand growth is expected to be stronger at close to 10 percent due to high latent demand. Besides, we also expect strong substitution demand due to gradual shift to grid power from diesel-based generation," Koparkar said. However, he maintained that on the operational front, projects that came up in the last few years will continue to face challenges. “Projects that have come up in the last four-five years will face operational challenges mainly due to slower demand.Due to this, they will have to operate at lower PLFs. Since most of these projects were aggressively bid at lower tariffs it will adversely impact their returns," he said. The overall plant load factors (PLFs) of coal-based plants are expected to be about 70-74 per cent during the 12th Plan compared to the highs of 77-79 percent seen during 2008-10, he said. Lower PLFs are expected to adversely impact returns for 18 GW of competitively bid plants that have levelised tariffs of less than Rs 3.1 per unit - a level needed to earn 15-16 percent return on equity. “Of this, close to 7 GW, which have been aggressively bid at levelised tariffs of below Rs 2.9 per unit, are at high risk of being unviable,” Koparkar added.
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