Increased risk of non-performing assets in India’s thermal power sector
23 March 2020 (IEEFA India): Contradicting recent claims from the Environment Ministry, India’s coal-fired power project pipeline is rapidly shrinking with 46 gigawatts of cancellations in the last twelve months adding to over 600 gigawatts of cancellations this past decade, finds a new briefing note published today by the Institute for Energy Economics and Financial Analysis (IEEFA).
Author Kashish Shah, energy analyst with IEEFA, says the latest data from Global Energy Monitor (GEM) shows a heightened risk for non-performing assets in India’s thermal power sector.
“In the last 12 months to January 2020, 46 gigawatts of coal-fired power projects were formally or informally cancelled, leaving only 37 gigawatts under construction,” says Shah.
“Yet just one week ago the Environment Ministry presented data in parliament suggesting 62.2 gigawatts of coal-fired power plants were under construction.
“GEM’s data shows an additional 29 gigawatts of coal-fired power under various stages of pre-construction development, but they are not under construction.
“These proposed projects will most likely not see the light of day, if the last ten years are any indication.”
Shah says more than 600 gigawatts of similarly proposed projects have been cancelled since 2010.
“This has stark implications for bankers, lenders and developers feeling the pain of the ongoing stress in India’s thermal power sector,” says Shah.
“As the viability has gone, funding has dried up for new projects.”
The note concludes that without subsidized support from government, in the form of concessional lending, waivers of even basic pollution controls and/or concessional tariffs, it is now unviable to build new non-mine mouth coal-fired projects in India.
The risk of these projects becoming non-performing assets is too high.