Massive fall in funding for coal projects

M.Ramesh Chennai | Updated on August 19, 2019

Of projects achieving financial closure in 2018, 80% of loans went to renewable projects

An analysis of power projects — both coal and renewables — that achieved financial closure in 2017 and 2018 reveals a massive 90 per cent fall in loans for coal.

As many as 54 projects that achieved financial closure in 2018 attracted ₹30,524 crore of loans; 80 per cent of it went to renewable energy projects, says a report titled ‘Coal Vs renewables finances analysis’, produced by a New Delhi-based research body, Centre for Financial Accountability (CFA).

There was a telling fall in lending for coal — the biggest cause of climate change-causing carbon dioxide emitter. In 2017, ₹60,767 crore of loans were sanctioned for 12 coal-fired projects worth 17,000 MW; in contrast, in 2018, only five projects of 3,800 MW got loan sanctions of ₹6,081 crore, the report says.

Last year, 49 renewable energy projects got loans worth ₹24,442 crore, which was ₹1,529 crore more than in the previous year. Of this, ₹18,263 crore came from private sector lending institutions. Sixty per cent of the loans were for solar PV projects and the rest were for wind.

However, of the ₹6,081 crore of loans sanctioned for coal-fired plants, ₹3,938 crore (65 per cent) came from lending institutions in which the government owned the majority stake. The larger coal projects that got loan sanctions in 2018 include the 1,980-MW Ghatampur power plant (₹1,207 crore), the 600-MW Haldia Thermal power plant (₹3,743 crore) and the 1,080-MW JSW Barmer power plant (₹721 crore).

The price factor

BusinessLine also learns independently that the price of electricity produced by the coal-fired plants is costlier than that of wind and solar plants.

For instance, the Ghatampur plant will sell power to the UP government for ₹4.5 a kWhr; wind and solar power comes for around ₹2.80 a kWhr. Incidentally, the Ghatampur power project is being put up as a joint venture between NLCIL (formerly, Neyveli Lignite Corporation) and the UP government-owned Uttar Pradesh Rajya Vidyut Utpadan Nigam. Rakesh Kumar, Chairman and Managing Director of NLCIL, told BusinessLine recently that the project, after some delays, is on track and the first of the three units of 660 MW each, will go on stream in November 2020.

Lenders baulking at giving loans to coal projects is in line with global trends, where major financiers are keeping off coal-fired projects. A recent report of Institute of Energy Economics and Financial Analysis (IEEFA), a Cleveland, US-based research and analysis body, showed that over a 100 financial institutions have announced pulling their investments out of coal projects.

The 100th such announcement came in the end of 2018, by the European Bank of Reconstruction and Development.

Only last month, KfW of Germany and the US insurer, Chubb Ltd said they wouldn’t anymore deal with coal projects. The latter even said it wouldn’t even underwrite coal projects.

Published on August 19, 2019

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