Moody's ups India's power sector outlook from negative to stable

Ratings agency Moody's on Thursday upgraded the outlook for the Indian power sector to stable from negative on the back of a jump in domestic coal production and likely improvement in the financial health of state distribution companies (discoms) by joining the Union government's UDAY debt restructuring scheme.

"We have changed the outlook for the Indian power sector to stable from negative, because the increased domestic production of coal will ease constraints on fuel supply," Moody's Investor Service said in its report titled 'Power Sector - Asia Pacific: 2017 Outlook - Rising Industry Challenges Are Manageable, Outlook Stable'.

"In addition, the Indian government's debt restructuring of the financially weak distribution utilities, which are also known as state electricity boards (SEB), will likely improve their financial capacity to make timely payments to power generators," it said.

"In India, renewable generation could act as a complementary source of power rather than a competitor to thermal, owing to power shortages," it added.

In a release from Singapore, the American agency said the stable outlook for the power sector in Asia-Pacific over the next 12 to 18 months is mainly underpinned by consistent regulatory returns alongwith the absence of significant changes to regulatory environments, as well as its expectation of manageable increases in fuel costs.

"Transparent tariff-setting mechanisms will continue to benefit the regulated power utilities in Australia, Hong Kong and Singapore," said Moody's Vice President and senior analyst Mic Kang.