Fitch Ratings’ India RE Portfolio Grows Despite Slowing Power Output

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In FY24, the performance of the ten rated India restricted groups within Fitch Ratings‘ portfolio of wind and solar project-finance transactions showed notable improvement. Despite this progress, the overall power generation continued to fall short of the agency’s one-year forecasts.

Nevertheless, there was a persistent upward trend in cash collection, driven largely by reforms introduced by the central government, as reported by the agency on Friday. These restricted groups, which fall under Fitch’s ‘renewable energy project rating criteria,’ encompass a total of 110 wind and solar assets with an aggregate capacity of 6,198 megawatts.

The wind energy generation saw an increase of 8% in FY24 compared to the previous year. Although this growth was slightly below the forecasted figure by 1%, it represented a significant improvement over FY23, when the generation had been 5% below the forecast.

In the solar sector, the generation capacity grew by 2% in FY24. This uptick can be attributed to the commissioning of new assets, and it exceeded the agency’s one-year estimate for FY23 by 1%. This performance indicates a positive trend, marking a continued growth in solar power generation.

One of the significant metrics tracked by Fitch Ratings is the receivable days for revenue generated from power sales. In FY24, these receivable days improved markedly, standing at approximately 100 days. This is a considerable reduction from the 140 days recorded in FY23.

The improvement in collections is a result of enhanced payment behavior from both wind and solar asset operators, with payments largely received on time from commercial and industrial customers over the past few years. However, there were some delays in payments from state distribution companies, particularly those in Rajasthan.

Despite this, the overall receivable days remained within a manageable range of 60 days. This continued improvement in cash collections and the reduction in receivable days reflects the positive impact of government reforms and enhanced operational efficiencies within the sector.

While the Indian restricted groups in Fitch Ratings’ renewable energy portfolio demonstrated improved performance in FY24, particularly in terms of wind and solar generation, the actual power output still lagged behind the agency’s forecasts. The progressive reduction in receivable days and better cash collection trends, however, underscore the positive trajectory of the sector, bolstered by supportive central government policies and reforms.