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India Ratings and Research (Ind-Ra) has published the October 2020 edition of its credit news digest on India’s power sector. The report highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions by Ind-Ra.
In September 2020, the all-India energy demand increased 4.0% yoy after declining for the six consecutive months to 112.6 billion units (August: down 2.0%; July 2020: down 4.1%; June 2020: down 10.9%). This was led by an improvement in the demand from the northern region (up 6.2%; August 2020: up 1.3%) and the western region (up 9.2%; down 3.3%), due to the further lifting of lockdown for certain economic activities under Unlock 4.0. Even though the energy demand has been recovering, the demand over 1HFY21 came in 8.7% yoy lower.
Electricity generation (excluding renewables) increased 4.4% yoy to 109.8 billion units in September 2020 (August 2020: down 2.6%), owing to an 8.4% yoy growth in thermal generation. Thermal PLF increased to 55.2% in September 2020 (September 2019: 51.3%; August 2020: 49.0%) on account of the increased demand and sufficient coal supply at power plants. Central and private sector PLFs increased to 62.8% in September 2020 (September 2019: 58.8%) and 59.9% (51.3%), respectively, while state sector PLF fell marginally to 43.0% (43.4%). The increase in central sector PLF was majorly due to an improvement in the PLF of NTPC Limited to 65.6% (61.8%; ‘IND AAA’/Stable) and that of Damodar Valley Corporation to 66.9% (51.5%, ‘IND A-’/Stable). The thermal PLF over 1HFY21 was lower at 49.6% (1HFY20: 57.9%), most impacted by the decline in the power demand, given the must-run status of nuclear, hydro and renewables.
The short-term power price at Indian Energy Exchange continued to be low at INR2.69/kWh in September 2020 (September 2019: INR2.77/kWh; August 2020: INR2.43/kWh) with a 35% yoy increase in the traded volume witnessed in the day-ahead market. The increased power demand in the short-term power market was on account of the favourable prices on the exchanges for both distribution companies and open-access buyers and the gradual lifting of the lockdown.
The coal production by Coal India Limited increased 31.6% yoy to 40.5mt in September 2020 (September 2019: 30.8mt; August 2020: 37.2mt) owing to the higher production at its key subsidiaries – Mahanadi Coalfields Limited (up 68.5% yoy), Central Coalfields Limited (up 47.4% yoy) and Northern Coalfields Limited (up 20.8% yoy) due to the resolution of the previous year’s issues such as protests at one of the mines and heavy rainfall. The coal inventory at thermal power stations rose 98.2% yoy to 34.2mtpa in September 2020, due to continued coal production, as coal is an essential service, and lower consumption over 1HFY21. The recovery in power demand over 1HFY21 led to a gradual rise in coal offtake over the same period (September 2020: 46.46mtpa; April 2020: 39.06mtpa). However, Coal India’s coal supply to the power sector fell 10.0% yoy in 1HFY21 to 197.9 million tonnes.
The transmission line addition was lower over 1HFY21, with 11,541 circuit kilometres (km) added (1HFY20: 12,766 circuit km) although the length of transmission lines added in September 2020 was higher at 4,203 circuit km (September 2019: 766 circuit km), with 89.2% of addition coming from the central sector.