Indian power firms expected to remain resilient amid cooling demand, says Fitch
| 2025-05-13
Fitch Ratings attributes the unexpected dip in India’s FY25 power demand growth to a slowdown in economic activity.
Fitch Ratings forecasts stable credit profiles for Indian power companies despite slower electricity demand growth and rising renewable energy investments.
Credit ratings for Indian power generation companies are likely to remain stable over the medium term, despite a notable slowdown in electricity demand growth, according to Fitch Ratings.
The agency projects power demand in India will rise by 4–5% annually in the coming years—consistent with the 4% growth recorded in the financial year ending March 2025 (FY25), but markedly slower than the average 8% growth seen between FY22 and FY24.
Fitch says the dip in demand reflects a broader deceleration in India’s economic growth, with gross domestic product estimated at 6.2% in FY25, down from 9.2% the previous year. Nevertheless, the agency maintains that most Fitch-rated power companies in India are well positioned to weather the demand weakness due to their business models and regulatory safeguards.
Resilience of Key Generators
Fitch identified NTPC Limited, Power Grid Corporation of India Ltd, and Adani Energy Solutions Limited as companies whose credit profiles remain relatively insulated. These firms derive a substantial portion of their cash flows from the high availability of generation and transmission assets—characteristics that reduce their exposure to fluctuations in electricity consumption.
“Volume risks are mitigated for these companies because of regulated returns and long-term contracts,” the agency noted in its report. Power companies with long-term fixed-tariff agreements and 'must-run' provisions for renewable sources are expected to maintain steady revenue flows, even amid a subdued demand environment.
Vulnerabilities in the Sector
Despite this resilience, Fitch warned that some generation companies could face indirect challenges if lower demand persists and places strain on state-owned distribution companies (discoms). These discoms are the primary purchasers of electricity in India and have historically faced financial difficulties, including delays in payments to generators.
Continuum Green Energy Holdings Limited, which sells electricity primarily to commercial and industrial users under shorter-term contracts, may be more exposed to demand fluctuations and pricing risks, according to the report. However, the company’s limited reliance on discoms offers some protection from payment-related uncertainties.
Investment Outlook and Renewable Growth
Fitch expects capital expenditure among Indian power utilities to remain elevated in the medium term, especially in renewable energy. The Indian government aims to increase renewable power capacity to 500 gigawatts by 2030, from the current level of approximately 220 gigawatts.
Renewable capacity additions reached 30GW in FY25, up from 18GW in FY24, and are forecast to remain high in FY26. Fitch cautioned that significantly higher capital spending than anticipated could narrow the financial buffers of certain renewable-focused companies, including Greenko Energy Holdings, ReNew Energy Global Plc, and Continuum Green Energy Holdings.
India’s rapid expansion of renewable energy is also expected to curb demand for coal. Coal consumption growth slowed to 3.4% year-on-year in the first 11 months of FY25, compared with 9.4% in FY24. Fitch anticipates that the plant load factor for thermal power stations will drop from about 69% in FY24–FY25 to around 65% in the medium term, assuming continued renewable growth and improved domestic coal supply.
Capacity and Demand Management
Despite softer overall demand growth, peak electricity demand is expected to remain robust. Rising temperatures and extreme weather events could drive increased use of cooling systems, particularly between April and June. Peak demand reached 250GW in May 2024, and similar levels are expected in the near term.
Fitch believes the system’s capacity to meet these peaks will remain adequate, supported by higher coal inventories and recent additions to renewable capacity.
India’s Power Sector Transformation
India’s power sector is undergoing a significant transformation, with increasing focus on decarbonisation and infrastructure modernisation. While traditional coal-based generation continues to play a major role, government policies and private investments are accelerating the shift toward renewable energy.
The push for cleaner energy aligns with India’s broader climate commitments and efforts to reduce dependence on imported fuels. However, the transition also brings financial challenges, including the need to balance capital investments with stable returns and ensure the financial health of discoms.
As India navigates these changes, Fitch’s latest assessment suggests that, at least for now, the credit stability of its major power companies remains intact—anchored by regulatory protections and long-term planning.
The agency projects power demand in India will rise by 4–5% annually in the coming years—consistent with the 4% growth recorded in the financial year ending March 2025 (FY25), but markedly slower than the average 8% growth seen between FY22 and FY24.
Fitch says the dip in demand reflects a broader deceleration in India’s economic growth, with gross domestic product estimated at 6.2% in FY25, down from 9.2% the previous year. Nevertheless, the agency maintains that most Fitch-rated power companies in India are well positioned to weather the demand weakness due to their business models and regulatory safeguards.
Resilience of Key Generators
Fitch identified NTPC Limited, Power Grid Corporation of India Ltd, and Adani Energy Solutions Limited as companies whose credit profiles remain relatively insulated. These firms derive a substantial portion of their cash flows from the high availability of generation and transmission assets—characteristics that reduce their exposure to fluctuations in electricity consumption.
“Volume risks are mitigated for these companies because of regulated returns and long-term contracts,” the agency noted in its report. Power companies with long-term fixed-tariff agreements and 'must-run' provisions for renewable sources are expected to maintain steady revenue flows, even amid a subdued demand environment.
Vulnerabilities in the Sector
Despite this resilience, Fitch warned that some generation companies could face indirect challenges if lower demand persists and places strain on state-owned distribution companies (discoms). These discoms are the primary purchasers of electricity in India and have historically faced financial difficulties, including delays in payments to generators.
Continuum Green Energy Holdings Limited, which sells electricity primarily to commercial and industrial users under shorter-term contracts, may be more exposed to demand fluctuations and pricing risks, according to the report. However, the company’s limited reliance on discoms offers some protection from payment-related uncertainties.
Investment Outlook and Renewable Growth
Fitch expects capital expenditure among Indian power utilities to remain elevated in the medium term, especially in renewable energy. The Indian government aims to increase renewable power capacity to 500 gigawatts by 2030, from the current level of approximately 220 gigawatts.
Renewable capacity additions reached 30GW in FY25, up from 18GW in FY24, and are forecast to remain high in FY26. Fitch cautioned that significantly higher capital spending than anticipated could narrow the financial buffers of certain renewable-focused companies, including Greenko Energy Holdings, ReNew Energy Global Plc, and Continuum Green Energy Holdings.
India’s rapid expansion of renewable energy is also expected to curb demand for coal. Coal consumption growth slowed to 3.4% year-on-year in the first 11 months of FY25, compared with 9.4% in FY24. Fitch anticipates that the plant load factor for thermal power stations will drop from about 69% in FY24–FY25 to around 65% in the medium term, assuming continued renewable growth and improved domestic coal supply.
Capacity and Demand Management
Despite softer overall demand growth, peak electricity demand is expected to remain robust. Rising temperatures and extreme weather events could drive increased use of cooling systems, particularly between April and June. Peak demand reached 250GW in May 2024, and similar levels are expected in the near term.
Fitch believes the system’s capacity to meet these peaks will remain adequate, supported by higher coal inventories and recent additions to renewable capacity.
India’s Power Sector Transformation
India’s power sector is undergoing a significant transformation, with increasing focus on decarbonisation and infrastructure modernisation. While traditional coal-based generation continues to play a major role, government policies and private investments are accelerating the shift toward renewable energy.
The push for cleaner energy aligns with India’s broader climate commitments and efforts to reduce dependence on imported fuels. However, the transition also brings financial challenges, including the need to balance capital investments with stable returns and ensure the financial health of discoms.
As India navigates these changes, Fitch’s latest assessment suggests that, at least for now, the credit stability of its major power companies remains intact—anchored by regulatory protections and long-term planning.
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