March 26, 2024

Investors Could Benefit Financially from Early Coal-Fired Power Plant Retirement, New Analysis Shows

Investors Could Benefit Financially from Early Coal-Fired Power Plant Retirement, New Analysis Shows

Lawrence Ang, Managing Partner

Lawrence Ang, Managing Partner

Lawrence Ang, Managing Partner

Lawrence Ang, Managing Partner

Climate Smart Ventures (CSV) is pleased to have co-authored an in-depth report on coal retirement with Griffith Asia Institute of Griffith University, Brisbane and the Green Finance & Development Center of Fudan University, Shanghai.

The report analyzed six real coal plants in Pakistan and Vietnam to understand the enterprise values of these plants under different financing scenarios and future scenarios.

The results include the following:

  • For all six plants in Vietnam and Pakistan, the report’s modeling showed an increase in enterprise value with Asset/Portfolio Refinancing through early retirement;
  • When refinancing is bundled with renewable energy investments, the enterprise values would more than triple compared with the value of the original power purchasing agreement;
  • Accordingly, investors could benefit financially from early CFPP retirement;
  • Younger plants can shave more years off their commercial lifetime and be retired earlier due to higher relative debt burden and higher financing costs during the early years of operations;
  • In Pakistan with its very young CFPPs, refinancing would allow the retirement of the three plants seven to nine years ahead of schedule—while improving enterprise value.

Based on the results, this study recommends that Chinese companies, financial institutions and other investors engaged in overseas CFPPs consider reducing their CFPP exposure by shifting to renewable energy investments. Enterprise value and feasibility of CFPP retirement bundled with renewable investment would further improve through concessional loans, credit enhancement mechanisms and innovative financing instruments such as debt-for-climate swaps involving Chinese CFPP sponsors.

Learn more in the full report here.

The report is produced by the Griffith Asia Institute (GAI) at Griffith University, Brisbane, Australia in collaboration with the Green Finance & Development Center (GFDC) of the Fanhai International School of Finance at Fudan University, Shanghai, PR China and CSV. It is based on a project supported by the Coal Asset Transition Accelerator (CATA), of which CSV is a core member.

**About Climate Smart Ventures**

Climate Smart Ventures (CSV) is an advisory firm advancing the energy transition in Asia. Our expertise and projects span coal to clean utility-level energy transition, industrial decarbonization, grid transformation, transition finance, and government-level policy recommendations. We also provide ESG and sustainability advisory services, focused on decarbonization and management of environmental and social impacts. Ecosystem building and collaboration are key elements of our firm, which partners closely with the region’s leading corporates and power portfolio owners, investors, off-takers, and others. For more information, visit our website https://climatesmartventures.com.