Can investors benefit from the early retirement of coal plants: A plant-level analysis of Chinese-sponsored coal stations in Vietnam and Pakistan

Abstract

The global energy sector's shift towards decarbonization necessitates the early decommissioning of coal-fired power plants (CFPPs), requiring novel financing strategies. While research on financing CFPP retirement is extensive for developed countries, it remains nascent for developing nations, particularly in Asia, which holds 76% of the world's coal capacity. Initiatives like the Asian Development Bank's Energy Transition Mechanism and the Just Energy Transition Partnership reflect the growing focus on Asian CFPP retirement. However, challenges such as increasing electricity demand, the youth of Asian CFPPs, and dominant Chinese sponsorship complicate retirement efforts. This study evaluates the enterprise values of six Chinese-backed CFPPs in Vietnam and Pakistan commissioned between 2010 and 2023 and capacities ranging from 600 to 1320 MW under three financing models and future geoeconomic scenarios impacting CFPP cash flows. Findings indicate that refinancing can bolster enterprise values, supporting early retirement. Younger plants, with more operational years to forgo, are especially suitable for early retirement. Combining refinancing with early retirement and renewable energy investments can significantly enhance enterprise values, advocating for the expedited retirement of CFPPs.