[ET Net News Agency, 19 November 2020] Asia's slowing energy demand growth will impact
coal power producers the hardest as governments tighten environmental standards and
introduce policies that favor renewable energy, according to a new report by Moody's
Investors Service.
"For coal power producers, tariff schemes to compensate for lower dispatch volumes or
strategies to diversify their energy mix away from coal power are increasingly important,"
said Mic Kang, a Moody's Vice President and Senior Credit Officer.
Coal-fired power producers are also facing increasing competition from their renewable
energy counterparts, which have made technological advances to improve efficiency and
costs. If the levelized cost of energy for new wind and solar power plants -- both with
battery storage -- in China and India declines annually by a high single-digit to
a mid-teen percentage from H1 2020 to 2025-30, these alternatives will likely be just as
cost-competitive as coal power by 2025-30.
Rated coal power producers in China (A1 stable) and Korea (Aa2 stable) face a higher
risk of losing their cost-competitiveness due to the absence of consistent cost
pass-throughs, while producers operating with consistent regulated tariffs or power
purchase agreements in India (Baa3 negative), Indonesia (Baa2 stable) and Vietnam (Ba3
negative) are less exposed.
Additionally, financing capacity for Asia's coal power producers will continue to fall
as funding markets for debt issuers become greener and investors lose appetite for coal
power assets amid volume risk and uncertainty over the recovery of demand. But most rated
coal power producers, particularly state-owned ones, should be able to withstand the
pressure in the foreseeable future. (KL)