The overall plant load factor of thermal power plants would continue to improve and reach closer to 70 percent in the financial year 2024-24, said India Ratings and Research (Ind-Ra) on May 15.
Ind-Ra attributed healthy PLFs of thermal power plants to continued higher power demand, a ramp up in domestic coal production, slower capacity additions, and continued dependence on coal-based generation till the sufficient storage capacity is build up for energy transition towards renewables.
“Ind-Ra continues to see a demand-supply mismatch in the power market, which would lead to a continued uptick in plant load factors of thermal plants and elevated merchant tariffs. While solar capacity addition has picked up pace following a reduction in the module prices and renewable capacity addition is likely to remain at over 15GW annually, effective storage options still need to be developed for the renewable capacities to be able to provide round-the-clock power,” said Bhanu Patni, Associate Director, Corporate Ratings, Ind-Ra.
Ind-Ra expects merchant market prices to remain high in FY25 amid continued higher demand and slower thermal capacity addition. The agency, however, expects the thermal capacity addition to pick up pace over FY25-26 with the likely commissioning of 6-8 GW each year. The new draft tariff norms released by Central Electricity Regulatory Commission for FY25-FY29 also ensures stability by keeping the regulated returns of existing power plants, it added.
Ind-Ra said it expects the annual renewable capacity addition to maintain pace and remain at 15-18 GW over FY25-FY26, owing to a significant reduction in equipment prices, continued policy support, availability of liquidity and investment plans of some of the large corporate players in the renewable sector for growth.
It added that the execution timelines of renewable capacity addition would continue to hinge on the regulatory stance towards import duties on cell and modules, support towards domestic cells and modules manufacturing, and indigenisation push towards domestic equipment sourcing.
Oil and gas outlook
Ind-Ra expects the credit profile of downstream companies to remain stable during FY25, driven by a stable demand for petroleum products, declining-yet-healthy gross refining margins yielding healthy refining EBITDA, and reduced crack spreads lowering marketing losses.
“OMCs have kept retail prices relatively stable despite the sharp movements in crude price and spreads to as ensure stability in margins, which has also led them to earn higher margins in some periods, compensating for lower margins/losses in others. The trend is likely to continue in FY25,” the agency said.
Total refinery capacity addition in India is expected at 24 mtpa by FY26, said Ind-Ra. It expects OMCs’ debt to increase in FY25 to fund the planned capacity addition and modernisation.
Meanwhile, Ind-Ra opines upstream companies would continue to benefit from the elevated crude oil prices. “Oil prices continue to be impacted by the geopolitical conflicts and production cuts announced by OPEC+ countries. Ind-Ra expects the GoI to continue tweaking the special additional excise duty rates which have been applicable since July 1, 2022, to bring the net realisation level to $70/bbl-80/bbl (breakeven cost of upstream companies is estimated at $40/bbl). This coupled with an increase in the production of crude and natural gas is expected to improve EBITDA for upstream oil and gas companies in India,” it said.
The agency expects the CGD business to remain healthy in FY25, in view of the favourable regulatory policies, decline in prices of LNG, negative working capital cycle and demand creation in new geographical areas (GAs).
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