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)