India's IPPs hammered by declining plant utilisation

Power-distribution firms are financially inadequte to buy power.

According to Fitch Ratings, India’s power generators continue to face low and declining capacity utilisation, mainly because financially stressed power-distribution companies are unable to purchase power.

This underscores the importance of successfully addressing the power distributors’ financial health. For the first half of the financial year ending March 2016, the overall coal-fired plant load factor (PLF) in India fell 3.2pp yoy to 60%, with that of central-government-owned generation companies (gencos) falling 1pp yoy to 72%, state gencos’ falling 5pp to 55% and private gencos’ down 2.3pp to 57%.

Here's more from Fitch Ratings:

The country’s gas-based PLF for the period was unchanged at a low level of around 22%. The 7pp increase in private gencos’ PLF to 19% was offset by the 5.3pp drop in central gencos’ PLF to 23% and a 2.9pp fall for state gencos to 23%. It is primarily fuel unavailability that led to gas-based capacity either stranded or operating at grossly sub-optimal levels. 

Separately, the country’s thermal power-generation capacity has increased by an impressive 11% over the last year to 194GW at end-September 2015, driven by the addition of coal-fired power plants and privately owned facilities. 

The government’s revival package introduced in November 2015 for the distressed distribution companies will provide some breathing space, but successful implementation of adequate and timely tariff hikes, and lower aggregate technical and commercial (AT&C) losses will be essential to sustain structural improvement.