Unlocking Potential through Acquiring and Reviving Stranded Thermal Plants for NTPC’s Energy Security: IEEFA Report

According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), the acquisition and revival of stranded thermal power plants would be a more favorable option for NTPC, India’s largest power producer, instead of adding new capacity. The report suggests that strategic acquisition of six identified plants, with a total capacity of 6.1GW, in partnership with government-owned entities like Power Finance Corporation, REC, and National Asset Reconstruction Company Limited, could be a viable alternative.

The report emphasizes that investing in new thermal power assets poses the risk of stranded assets, as renewable energy has become economically more favorable. It further highlights that financing these thermal plants would expose domestic banks to potential non-performing assets (NPAs) and increased climate risks. By strategically acquiring and reviving power sector NPAs, NTPC, in partnership with other entities, could also help clean up the books of Indian banks, which have been burdened with high NPAs for a long time.

NTPC’s partnership with Power Finance Corporation’s subsidiary, PFC Projects Limited, and National Asset Reconstruction Company Limited is proposed in the report. PPL could provide finance for working capital requirements, while NARCL, with its 15:85 payment model and security receipts backed by a sovereign guarantee, could facilitate the acquisition of stranded thermal assets with reduced upfront capital investment for NTPC.

The report emphasizes that acquisition and revival should be followed by a post-acquisition strategy to retire and repurpose the acquired thermal assets for renewable energy generation. This approach would align well with NTPC’s goal of installing 60GW of renewable energy capacity by 2030 and attract capital from global environmental, social, and governance (ESG) investors. Additionally, exploring the carbon credits trading market could enhance the returns from repurposed projects.

The IEEFA report provides valuable insights for NTPC and highlights the potential benefits of acquiring and reviving stranded thermal power plants, both from an energy security perspective and for improving the company’s ESG profile.