Coal news and updates

Ind-Ra sustains negative outlook on thermal power

India Ratings (Ind-Ra) has continued its negative rating outlook at the project level for thermal power producers, on the back of muted demand, weak revenue counterparties, tariff under-recoveries, and transmission constraints, according to a report.

The benefits accrued due to ease in availability of fuel supply on the domestic front and sharp fall in imported coal prices to some extent were eroded by the depreciation in the currency.

However, a favourable verdict on compensatory tariff petitions, increased certainty and predictability in payments by distribution companies (discoms) for power offtake (against timely payment, which is a distance away), improved transmission network, successful implementation of UDAY, and an increase in power purchase by discoms could play out positively for the sector, Ind-Ra said.

New ultra-mega power plants (UMPPs) which are on the anvil for bidding could trigger the next stage of capacity additions through private participation.

Given their severe capital intense nature, power projects require support during the ramping-up stage. This requirement has also landed small-sized sponsors in financial distress, said Ind-Ra, forcing the projects to be available for consolidation.

“Unlike road projects, potential buyers in the thermal power sector are limited and this could influence valuations as well. We expect the consolidation to continue. However, valuations may not be attractive for the sellers. Thus, the process is unlikely to be completed soon,” Ind-Ra said.