Asia Pacific utilities post neutral outlook as demand and margins strengthen

The agency expects high levels of renewable installation to continue in 2026 despite persistent operational hurdles.

Fitch Ratings expects a neutral sector outlook for Asia Pacific utilities in 2026, projecting steady power and gas demand growth, higher margins from expanding renewable portfolios, and continued high capital expenditure on renewables and grid infrastructure.

The agency said most rated utilities in the region are government-related entities or their subsidiaries, meaning credit profiles and outlooks remain closely linked to sovereign ratings.

Standalone financial headroom is generally adequate, and metrics for project finance issuers are expected to stay stable.

Renewables now make up the majority of aggregate EBITDA for rated corporate generators in APAC, Fitch said.

Most rated project finance issuers are also renewable producers. The agency expects high levels of renewable installation to continue in 2026 despite persistent operational hurdles.

Fitch highlighted several challenges. In China, competitive bidding and greater merchant exposure are increasing tariff uncertainty.

In India, hybrid and more complex projects, along with grid-connection and land-approval requirements, may delay commissioning and cash inflows. Across the region, curtailment is likely to rise in some markets, constraining utilisation rates.

These pressures are partly offset by tailwinds. Falling equipment prices and lower unit capex continue to reduce generation costs.

Ongoing grid investment should alleviate bottlenecks, whilst the rollout of storage systems and flexible-demand programmes will help smooth intermittency and limit curtailment.