Scaling Financing for Coal Phase out in Emerging Economies 2025

To provide a baseline against which the retirement date of the plant and its emissions could be compared, the analysis included a set of assumptions as to what would happen to a CFPP as the Philippines’ energy transition unfolds through to 2050.21 This reflects the changing role of coal power as cleaner alternatives increasingly provide electricity more consistently and cheaply. It also reflects the hypothetical impacts of increasingly stringent government policy and regulations on generation and revenue. Assumptions included in the analysis FIGURE 5 Note: 1. The tail period is the time between the repayment of project debt and the end of the project’s operational life, providing a buffer for risk mitigation and additional financial returns. 2. DSCR (debt service coverage ratio) is a financial metric that measures a company’s ability to cover its debt obligations with its operating income; DSRA (debt service reserve account) is a reserve fund established to ensure sufficient funds are available to cover a borrower’s debt payments in case of cash flow shortfalls. Source: Coal-to-Clean Initiative In the model’s BAU scenario, a CFPP’s lifespan is capped at 40 years or 2050, whichever comes first, after which it is assumed the plant would retire anyway. Most plants in the Philippines have agreed PSAs, but not for the full remaining duration of their economic lives. A PSA extension of five years at the same tariff as the CFPP’s current PSA(s) is also assumed. After this, the CFPP moves onto the Philippines Wholesale Electricity Spot Market (WESM) where it competes against other sources of power based on cost and availability. The price drops to a middle-of-the-road WESM forecast and utilization drops by 30%.22 This reflects rising costs for the asset owner to keep the plant operating as it gets older, as well as declining competitiveness against other power generation. Capacity reduction post expiry of power supply agreement is 30% in load factor5 years’ extension is presumed on duration of power supply agreement in business-as-usual caseSpot market tariff is based on Aurora central average Repayment is sculpted with a minimum DSCR of 1.25 and one year DSRA provision2Existing loan tenor is assumed to be equivalent to longest active power supply agreementEarly retirement transaction date is January 2025Repayment duration of debt = remaining plant life minus tail period1 Scaling Financing for Coal Phase-out in Emerging Economies 11