Fitch Ratings said that ratings for Asia Pacific (APAC) thermal power projects will remain unaffected by the coronavirus pandemic. The ratings cover four thermal power projects in Asia, including Lalitpur Power Generation Company Ltd’s (LPGCL) super critical thermal power plant in Uttar Pradesh.
LPGCL is rated ‘BB+’ and stable. The others are Indonesian power producer Minejesa Capital BV and PT Lestari Banten Energi (LBE), both rated ‘BBB-’ with stable outlook. Vietnam-based Mong Duong Finance Holdings BV (MD2) is rated ‘BB’ with positive outlook.
Insulated from volatility
Fitch explained that these projects benefit from take-or-pay obligations under the long-term power purchase agreements, which insulate them from price volatility and demand shocks. A slowdown in economic activities due to the pandemic will soften power demand, but will not affect the capacity charges or fixed charges that these projects receive, it said.
These charges are the key sources of cash that the projects use to service debt, as the payment is based on the availability of the power station regardless of the dispatch.
Another factor that augurs positively for these power projects is the sourcing of coal. All these projects source coals from domestic mines. Paiton and LBE have multiple coal suppliers whereas MD2 and LPGCL procure coals from Vinacomin and Coal India Ltd, respectively, each of which is the state-owned monopoly in their countries, noted Fitch. Coal stocks at power plants in India is 41.8 million tonne, equivalent to 24 days’ consumption, as of March 26, 2020.
Further, Fitch expects the governments to ensure mining activities are not disrupted by the outbreak to continue the domestic supply of coal, which is important to electricity generation.