Moody's Investors Service has changed its outlook for the Indian power sector to negative from stable on declining power demand, payment delays and an adverse impact from government measures that favour consumers over utility compes.
It said power demand will drop at least four to five per cent in fiscal 2021 due to slowing activity and policy actions. Besides, compes are vulnerable to policy moves and payment delays from state-owned distributors.
"In addition to declining power demand -- which will hit short-term power prices and the utilisation of coal-based power plants -- state-owned distribution compes that rely on subsidies could delay making payments to power compes as the government is likely to pivot subsidies towards social and healthcare spending amid efforts to contain the outbreak," said Abhishek Tyagi, Moody's Vice President and Senior Analyst.
"While most of our rated issuers can absorb a degree of increased payment delays, some compes could experience stressed liquidity," he said in a statement.
Furthermore, the government's measures to reduce the economic impact of coronavirus on consumers like prohibiting compes from curtailing power for unpaid dues might cause a weakening in the credit profiles of power producers and transmission compes.
Moody's said maintaining liquidity buffers will be key for compes' credit profiles. Central government-owned utilities are better placed amid weakening demand and delayed payments while rated renewable energy compes are more vulnerable given their moderate to high financial leverage.
( With inputs from ANI )