RESEARCH
RESEARCH
Discoms to see marginal rise in credit metrics in 2017 : Fitch
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Indian power distribution firms will require large capex in 2017 which will lead to marginal improvement in their credit metrics , but their ratings may remain stable , says Fitch in its report .
itch expects the rated Indian state utilities to have large capex requirements in 2017 . This will lead to only marginal improvement in their credit metrics . However , we expect the ratings to remain stable . The linkages with the sovereign also provide a rating buffer for these entities , Fitch said in its its outlook report on the Indian utilities sector .
According to the report , 2017 is a test year for the success of the reforms package launched by India to address the persistent financial and operating weakness at stateowned electricity distribution companies ( discoms ). It said progress under this programme should give some additional breathing space to the discoms , which is important for the overall electricity off-take from generators in India and improvement of plant utilisation levels , which are at historic lows . It further said investment opportunities abound – especially in renewable generation and electricity network assets – but bidding discipline is key . Indian state distribution companies struggling with years of cash losses will have some leeway in 2017 , with 16 states and a union territory signed up for voluntary financial and operational restructuring of their distribution utilities , it said . However , Fitch Ratings believes that sustained improvement in distribution companies ’ financial profiles will hinge on gradual reduction of network losses . Generation and transmission utilities will in turn benefit from timely clearance of dues and higher utilisation rates , it added . Fitch expects greater private sector participation in grid assets as more projects are tendered although PGCIL will account for more than two-thirds of new capacity investments . Interest and investments in renewable energy will continue , supported by government policy initiatives . However , bidding discipline , especially in solar , remains an issue .
“ We expect electricity prices to continue to hover at their low levels in 2017 . This will be driven by high generation sent out from power stations , continued grid congestion and poor financial health of the distribution companies limiting off-take ,” it said . Fitch expects issuers , including smaller renewable players , to continue to tap offshore markets to diversify their funding sources and take advantage of potentially lower interest rates . This will free up bank facilities as well .
Source : PTI