Ind-Ra expects merchant market prices to remain elevated in FY25, driven by sustained high demand and sluggish thermal capacity expansions. However, it foresees an acceleration in thermal capacity additions over FY25-26, with annual commissioning expected to range between 6-8GW. The new draft tariff norms by the Central Electricity Regulatory Commission for FY25-FY29 aim to maintain stability; ensuring regulated returns for existing power plants.

Additionally, the agency predicts continued renewable capacity additions at a pace of 15-18GW annually over FY25-FY26, supported by lower equipment costs, favorable policies, and liquidity availability. However, the pace of execution will hinge on regulatory approaches towards import duties, domestic manufacturing support, and equipment sourcing.

Ind-Ra highlights pumped storage hydro power projects as a viable solution, especially given the economic challenges of battery storage. The agency also notes improvements in the financial position of generating companies, driven by better liquidity in distribution companies and improvements in payment behavior.

Moreover, there's observed a shift in the business model of large corporates towards non-regulated activities and increased renewable capacity. Ind-Ra remains optimistic about the stability of credit metrics for rated sector entities in FY25, supported by additional earnings from new capacities and deleveraging, despite ongoing capital expenditure plans. The agency maintains a stable rating outlook for FY25, confirming sufficient liquidity buffers for most rated issuers in the 'A' and above categories.

(Source: ET Energy)