Thermal power plant load factor to remain healthy at 70% in FY25: ICRA

Thermal plant load factor or capacity utilisation is expected to remain healthy at 70 per cent in FY2025 on power demand growth of 6 per cent, ICRA said on Thursday.

ICRA's outlook for the thermal power segment is "Stable", following the improvement in the thermal plant load factor (PLF) and healthy demand growth, thereby improving visibility on signing of new power purchase agreements (PPAs), an ICRA statement said.

Also, it stated that the implementation of the Late Payment Surcharge (LPS) scheme enabled an improvement in payment discipline from state distribution utilities (discoms) to power generation companies from August 2022.

However, it stated that ICRA's outlook for the power distribution segment remains "Negative" amid limited tariff hikes and continued loss-making operations.

According to the statement, ICRA projects the all-India thermal PLF level to rise marginally to 70 per cent in FY2025, from 69 per cent in FY2024, led by the growth in electricity demand and limited thermal capacity addition.

The rating agency projects the full-year demand growth for FY2025 at 6 per cent, slightly lower than its expectation for the GDP growth for this fiscal (6.8 per cent).

While this trails the growth of 7.6 per cent reported in FY2024, it remains higher than the historical average seen over the past 10 years.

The healthy growth in electricity demand over the past three years has necessitated a rethink on thermal capacity addition, with the government looking to encourage new thermal power projects, including private sector participation, it stated.

Vikram V, Vice President & Co-Group Head - Corporate Ratings, ICRA, said in the statement that ICRA expects the generation capacity addition to increase to 30 GW in FY2025 from 25 GW in FY2024, with the overall installed power generation capacity surpassing 470 GW by March 2025.

The thermal segment is expected to add 5.0-5.5 GW capacity in FY2025, with the balance 25 GW contributed by the renewable energy (RE) segment, he added.

While the RE segment would remain the key driver of the generation capacity addition going forward, ICRA expects the thermal segment to witness new project announcements, given the healthy demand growth, he stated.