[ET Net News Agency, 18 May 2020] Moody's Investors Service said in a new report that
coronavirus-related disruptions and the material slowdown in China's (A1 stable) economy
will lead to sluggish power demand in the country in 2020, elevating challenges for
companies in the power sector.
"Power consumption in China fell 6.5% year-on-year in Q1 2020 as the economy shut down,
and despite some recovery since April we expect demand will be flat for the full year
before improving to mid-single-digit percentages in 2021," said Ivy Poon, a Moody's Vice
President and Senior Analyst.
"The credit impact on power companies will vary, with grid companies and coal-fired
generation companies to see credit metrics weaken, but the limited impact for renewable
energy companies," added Poon.
The 1Q results of grid companies were dented by the coronavirus disruptions as revenue
declined significantly while fixed overheads remained high. Temporary tariff reductions to
support the slowing economy, in particular, have weighed on revenue, although any
extensions may not be fully borne by grid companies like the initial tariff cuts were.
Meanwhile, weak power consumption growth will reduce coal-fired power utilization hours
by around 5% on average in 2020 and keep growth flat in 2021, as renewables receive
priority dispatch in generated electricity over coal-fired power. Nevertheless, the
overall impact will be partly mitigated by declining coal prices.
The drop in coal-fired utilization hours will reduce power generation volumes and cash
flow, pushing leverage higher for coal-fired generation companies.
Finally, Moody's does not expect renewable energy companies to be affected by weak power
demand due to their priority dispatch. (KL)