Coal and power demand to boost recovery for thermal power sector
POWER & RENEWABLE ENERGY

Coal and power demand to boost recovery for thermal power sector

Asset Reconstruction Companies (ARCs) are set for a significant rise in recovery rates from stressed operational thermal power plants (TPPs) in the next fiscal, according to a report by CRISIL Ratings. Recovery rates are projected to increase by 700-900 basis points, reaching 83-85%, driven by higher power consumption, improved coal supply, and consistent payments from distribution companies (discoms).

The report attributes these improvements to a 6-7% rise in power consumption this fiscal, spurred by growing demand from the commercial and industrial sectors and continued urbanisation. Government efforts to boost coal availability led to an 8.8% increase last fiscal, resulting in healthy coal inventories that will support uninterrupted operations.

Mohit Makhija, Senior Director, CRISIL Ratings, highlighted the positive trend, stating, "The operating performance and cash flows of stressed TPPs will strengthen this fiscal, with timely payments from discoms enhancing liquidity. The receivables for thermal plants rated by us have improved to 185 days as of March 31, 2024, down from 200 days a year earlier."

The analysis focuses on stressed TPPs with principal debt of approximately Rs 180 billion across 4 GW, accounting for about 50% of the operational TPP capacity under ARCs. Increased coal availability, along with strong demand from discoms and higher merchant sales, is expected to raise the average plant load factor (PLF) for stressed TPPs to around 70%, up from 66% in 2023.

Meanwhile, around 5 GW of thermal capacity with over Rs 500 billion in debt is awaiting resolution under the Insolvency and Bankruptcy Code. These capacities faced stress due to over-leverage, project delays, and lack of power purchase agreements (PPAs) during 2018-2019. However, about 55% of this capacity could be operationalised with fresh investment, and 45% already have PPAs in place, with an additional 3 GW having the necessary groundwork for expansion.

Sushant Sarode, Director, CRISIL Ratings, noted that investors looking to resolve stressed TPPs will benefit from faster supply additions compared to greenfield projects. Large companies are expected to invest in these assets, as seen in the strategic buyouts of 11 GW of stressed capacity over the past three fiscals.

The continuation of favorable fuel supply policies and discom payments, along with the resolution of stressed assets, will be key factors to watch in the coming months.

(ET)

Asset Reconstruction Companies (ARCs) are set for a significant rise in recovery rates from stressed operational thermal power plants (TPPs) in the next fiscal, according to a report by CRISIL Ratings. Recovery rates are projected to increase by 700-900 basis points, reaching 83-85%, driven by higher power consumption, improved coal supply, and consistent payments from distribution companies (discoms). The report attributes these improvements to a 6-7% rise in power consumption this fiscal, spurred by growing demand from the commercial and industrial sectors and continued urbanisation. Government efforts to boost coal availability led to an 8.8% increase last fiscal, resulting in healthy coal inventories that will support uninterrupted operations. Mohit Makhija, Senior Director, CRISIL Ratings, highlighted the positive trend, stating, The operating performance and cash flows of stressed TPPs will strengthen this fiscal, with timely payments from discoms enhancing liquidity. The receivables for thermal plants rated by us have improved to 185 days as of March 31, 2024, down from 200 days a year earlier. The analysis focuses on stressed TPPs with principal debt of approximately Rs 180 billion across 4 GW, accounting for about 50% of the operational TPP capacity under ARCs. Increased coal availability, along with strong demand from discoms and higher merchant sales, is expected to raise the average plant load factor (PLF) for stressed TPPs to around 70%, up from 66% in 2023. Meanwhile, around 5 GW of thermal capacity with over Rs 500 billion in debt is awaiting resolution under the Insolvency and Bankruptcy Code. These capacities faced stress due to over-leverage, project delays, and lack of power purchase agreements (PPAs) during 2018-2019. However, about 55% of this capacity could be operationalised with fresh investment, and 45% already have PPAs in place, with an additional 3 GW having the necessary groundwork for expansion. Sushant Sarode, Director, CRISIL Ratings, noted that investors looking to resolve stressed TPPs will benefit from faster supply additions compared to greenfield projects. Large companies are expected to invest in these assets, as seen in the strategic buyouts of 11 GW of stressed capacity over the past three fiscals. The continuation of favorable fuel supply policies and discom payments, along with the resolution of stressed assets, will be key factors to watch in the coming months. (ET)

Next Story
Infrastructure Transport

Tata, Airbus to Build India’s First Private Helicopter Line

In a landmark development for India’s aerospace sector, Tata Advanced Systems Limited (TASL) and Airbus will establish the country’s first private-sector helicopter assembly line in Vemagal, Karnataka. The facility will manufacture the Airbus H125 and H125M, marking a significant milestone in India’s push for self-reliance in aviation and defence manufacturing. The new Final Assembly Line (FAL) will produce the H125, the world’s best-selling single-engine helicopter, known for its versatility and performance in extreme environments. The first ‘Made in India’ H125 is expected to ro..

Next Story
Infrastructure Urban

NeGD to Support Bharat Taxi in Building Cooperative Ride Platform

In a significant move for India’s digital and mobility transformation, the National e-Governance Division (NeGD) of the Digital India Corporation, under the Ministry of Electronics and Information Technology (MeitY), has entered into an advisory partnership with Sahakar Taxi Cooperative Limited, the company behind Bharat Taxi — a first-of-its-kind, cooperative-led national ride-hailing platform. A Memorandum of Understanding (MoU) has been signed between NeGD and Sahakar Taxi to provide strategic advisory and technical support covering key areas such as platform integration, cybersecurity..

Next Story
Technology

MeitY Hosts Pre-Summit for India–AI Impact Summit 2026

The Ministry of Electronics and Information Technology (MeitY), Government of India, hosted a series of Pre-Summit events for the upcoming India–AI Impact Summit 2026 at the India Mobile Congress (IMC) 2025 in New Delhi. These sessions mark a key milestone ahead of the main summit, scheduled for 19–20 February 2026 at Bharat Mandapam, New Delhi. Delivering the inaugural address, S. Krishnan, Secretary, MeitY, highlighted India’s innovative and frugal approach to AI development. “We have adopted innovative means by learning from others’ experiences to build projects and products that..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?