Financial retirement mechanisms

Carbon Tracker's Power Asset-Level Economics Model (CTI-PALEM) builds on our existing asset-level data to quantify the costs of using transition finance to expedite coal phaseouts​.

We cost coal retirements to support three key financial stakeholder groups when refinancing and making retirement deals. Using the tabs below, you can view data from the perspective of:

  • Initial investors: The initial equity sponsor and bank(s) that lent capital to construct the coal plant.

  • Refinancers: International public and/or development finance institutions that want to assist developing economies in decarbonising their energy sectors.

  • Donor/subsidy providers: Donors or sources of subsidy funding, like philanthropies or carbon abatement revenues, that can provide additional payments to ensure refinancers meet their minimum return on investment in the case of early retirement. ​

Overview

CTI-PALEM generates data for multiple combinations of concessional debt and/or equity refinancing across a spectrum of more or less aggressive phaseout scenarios. Using each stakeholder’s unique and individual parameters, all costs and pathways are modelled so that stakeholders receive a return on investment equal to their hurdle rate.

This data is underpinned by detailed, asset-level, discounted cashflow analyses of the youngest coal plants in the Philippines, which reached financial close on or after 2010.

This tool is useful for key stakeholders involved in financing the energy transition in developing economies. CTI-PALEM can be used to identify priority coal units and cost-optimised phaseout pathways in ways that not only limit the use of transition finance, but also to extract the highest value for money on a US$/tCO2-avoided basis.

Coal refinancing and retirement 101
Business as usual
The coal unit is operating as usual, generating revenue for its initial investors and paying off its loan. It will retire at the end of its BAU lifetime.
Loan repaymentPPA lifetimeMerchantEquity paymentsCoal unit expected lifetime 2020202520302035204020452050 Offtaker Investor PPA revenuesReturns toshareholdersPrinciple repayment+ interest expensesIcons by BEJOUN, Lucas Helle, Rflor, Safaidin, Colourcreatype
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