India is undergoing an energy transition from fossil-based to clean energy. Our quarterly Market Handbook helps identify and analyse trends, present data-backed evidence and connect the dots to present a short-term market outlook.
Key Findings
  • Total generation for Q2 FY21 was marginally up (0.8%) from Q1 FY20 due to the lifting up of the Covid-19 lockdown.
    • July: Down by 1.4%
    • August: Down by 1.0%
    • September: Up by 5.0%
    • Total Q1 FY21: Up by 0.8%
  • RE generation fell 4.7%, while coal/lignite generation was up by 1.3% (vs Q2 FY20).
  • The decline in RE generation can be attributed to exceptionally low wind speeds in high-wind states (Rajasthan, Gujarat and Tamil Nadu) leading to a decline in wind energy generation by 41.1% in July 2020 (vs July 2019).
Figure 1: Source-wise daily generation
  • The states with the most payment delays are Rajasthan, Uttar Pradesh, Uttarakhand, Andhra Pradesh, Telangana, Karnataka, Bihar, and Tamil Nadu.
  • PFC/REC sanctioned INR 37,607 crore of the INR 90,000 crore (as of August 2020) liquidity package issued for discoms. The package includes loans for discoms to clear delayed power purchase payments; the loans are for a tenure of 10 years with a moratorium of up to 3 years.
  • The states that utilised the loans were Uttar Pradesh, Telangana, Andhra Pradesh, Rajasthan, Punjab, West Bengal, and Manipur.
Figure 2: Discom payable and receivable days for RE rich states
  • The share prices of pure-play RE developers such as Adani Green and Azure Power significantly outperformed the market, as the stocks continued to attract investor interest as the Covid-19 lockdown gradually lifted.
  • The stock price of Inox Wind, a developer-manufacturer remained flat versus the previous quarter, whereas that of Suzlon, another developer–manufacturer, fell significantly as a widening net loss in Q1 FY 21 (reported in Q2) dashed investor hopes of a debt restructuring led recovery.
  • Other listed RE companies such as Sterling Wilson Solar (EPC) and Borosil Renewables (glass manufacturing)continue to underperform the market due to specific issues.
Figure 3: Change in key renewable energy stock prices (indexed to 100)
  • The purpose of green bond capital raises has traditionally been to refinance existing project debt, with Adani Green and ReNew Power being among the most active issuers.
  • The twin challenges of low liquidity in the Indian bond market coupled with credit rating constraints (most RE project loans are typically rated below AA, the minimum requirement for local market acceptance), is what has driven Indian RE developers to tap the international debt capital markets.
  • However, the economic shock caused by Covid-19 had hit RE developer bonds particularly hard, with yields rising sharply in Q1 FY21. This proved to be a temporary aberration.
  • Higher than pre Covid-19 level yields in Q2 FY21 continued to act as a deterrent to new issuancesIndian RE developers only began returning to the overseas green bond markets as yields subsequently reverted close to their pre Covid-19 levels, but after the quarter (Q2 FY21) had ended.
Figure 4: Bond yields and key financial rates
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