The rating agency said supply issues in times of surging demand might sporadically affect generators, however, projects can maintain availability using imported coal, as clarity has emerged on full pass-through of imported coal cost during a short domestic supply. Adequate liquidity and working capital limits are critical to manage increase in costs or some delay in receivables, it added.
“The positive outlook is based on the expected plant load factor of above 65% for FY24 and FY25, better visibility of coal cost pass-through and adequate liquidity,” it said in a statement.
Despite the focus on green energy, coal-based power plants are back in demand as power demand this year has reached record levels and Centre has directed all power plants including imported coal-based plants to run at full capacity. Recently, power minister RK Singh had said that 12 GW of thermal power capacity would be set up in the country by March 2024.
On the energy infrastructure as a whole, India Rating has observed significant moderation in the receivables cycle across counterparties after the implementation of the LPS rules, 2022, leading to an improvement in liquidity profile of projects having weak counterparties. State of internal liquidity compared to the strength and diversification of counterparties continues to be a key rating factor for all generation assets, it said.
“There has been an increase in the tender activity on the renewables front with auctioned capacity in 1HFY24 already exceeding the total capacity auctioned in FY23. However, execution challenges remain with land acquisition and transmission connectivity being critical, as commodity prices are moderating,” it said.
It continued with the stable rating outlook, for solar power projects as they continue to have stable operations, adequate debt service coverage and comfortable internal liquidity. “The significant fall in module prices over the past six months is positive for under-construction projects; however, timely project completion is critical in view of the slowdown in capacity addition observed in 1HFY24 compared to previous year,” the statement said.
It, however, assigned a negative rating outlook for wind power projects as they continue to be marred by generation variability. India Ratings expects wind power generation in FY24 to be at levels similar to FY23.
It noted that elimination of reverse auction is likely to allow developers bid with a better risk-return profile and improve the capacity addition in the medium term.
Source : Mint