Grim outlook looms for India's power sector

Will it be the same for its Asian peers?

Moody's Investors Service says that the overall outlook is stable for the power sector in Asia (ex-Japan) in 2014, mainly because of supportive regulatory policies, which result in stable market structures and low probabilities of adverse adjustments to tariff structures or returns.

However, the Indian power sector remains an outlier. Moody's outlook for the Indian market is negative in 2014, due to the structural challenges in the entire value chain. The outlook for India's power sector was also negative in 2013.

On leverage, Moody's expects debt levels in the power industry across Asia (ex-Japan) to be stable over the next 12-18 months, supported by increasing cash flows from capacity additions and stable-to-declining fuel costs, and despite high levels of capital expenditure.

Moody's conclusions were contained in a just-released report titled, "2014 Outlook: Asia (ex-Japan) Power Sector, Supportive Regulatory Policies Drive Stable Outlooks, But India Is an Outlier." The report was co-authored by Mic Kang, a Moody's Vice President and Senior Analyst, Ivan Chung, a Moody's Vice President and Senior Credit Officer, Ray Tay, a Moody's Assistant Vice President and Analyst and Ivy Poon, a Moody's Analyst.