Power distribution companies are likely to benefit substantially from Ujwal Discom Assurance Yojana (UDAY) related measures but improvement in efficiency levels by discoms remains critical for their sustained financial turnaround and for the viability of the thermal generation sector, research firm ICRA said in a statement.
Average capacity utilisation for thermal power stations on an all-India basis has remained subdued at 59.3 per cent during the five months between April and August 2016 as against 62.3 per cent in FY2016, due to factors like paying capacity constraints of state-owned distribution utilities, higher generation from the hydro and renewable segment and a sizeable increase in thermal power generation capacity over the last 16 months.
Sabyasachi Majumdar, Senior Vice President, ICRA Ratings, said: “We expect average all-India thermal PLF levels to show some improvement from 59% in 5M FY2017 to a range of 61-63% in the near term; although still at subdued levels. This will be driven by off-take from the discoms, which are likely to benefit with de-leveraging and refinancing of debt on their books under UDAY, policy measures such as flexible utilisation of coal linkages and the e-auction framework for short-term power procurement and improved domestic coal availability.”
Slow progress in signing of long-term power purchase agreements by utilities has led to sizeable thermal capacity (estimated at ~25 GW) remaining exposed to price and volume risks in the short-term power market.
In turn, utilities are increasingly showing a preference for tie-up of short to medium term power purchase agreements. This is an area of concern for independent power producers’ capacity which is waiting for long term PPA tie-up, especially given the subdued level of short-term traded price level that vary between Rs. 2.5 per and Rs 3.5 per unit, both on the reverse auction platform and the power exchanges.
On the regulatory front, State Electricity Regulatory Commissions (SERCs) in 20 out of 29 states have issued tariff orders for state-owned discoms so far for FY2017, which implies some progress in terms of issuance of tariff orders for the year.
However, it is a matter of concern that tariff orders are pending in large states such as Rajasthan, Tamil Nadu, and West Bengal for FY2017.
“Greater focus by utilities on improving their efficiency levels in line with targets coupled with timeliness and adequacy of tariff hike in relation to cost of power supply, including periodic pass-through of fuel and power purchase cost remains critical in the long run for sustained improvement in the financial position of the discoms,” Majumdar said. Bob Griese JerseyShare This