Outlook For India's Thermal Power Sector Revised To Stable: ICRA

ICRA Research Report

Our outlook for thermal power segment has been revised to stable from negative, supported by the healthy improvement in thermal plant load factor level in FY23, which is likely to sustain in FY24 and the reduction in dues from state distribution utilities (discoms). The PLF improvement is driven by the strong recovery in electricity demand growth in the country.

The all-India thermal PLF level is expected to improve from 58.9% in FY22 to 64.0% in FY23 and further to 65.5% in FY24, led by a healthy demand growth and limited thermal capacity addition. The full-year demand growth for FY23 is estimated at 9.5-10%, which is likely to moderate in FY24, though remaining healthy at 5.5-6.0%.

A sustained growth in electricity demand is expected to improve the visibility on signing of new power purchase agreements for the thermal independent power producers. This is evident from the recent medium-term (five-year) PPA tender for 4.5 giga watt issued by PFC Consulting Ltd. This is a positive for thermal IPPs, as lack of PPAs remained one of the major concerns leading to large stressed capacity in the thermal power sector.

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