Banks stepping back on coal funding in India
The report, prepared by the Centre for Financial Accountability and Climate Trends, looked at 50 project finance loans across 43 coal-fired and renewable energy projects in India
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126% drop in funding from commercial banks: Report
New Delhi: The third annual 'Coal vs Renewable Financial Analysis-2019' marks a second consecutive year-on-year decline in coal funding in India following a 90 per cent decrease in 2018.
The report, made public on Tuesday, finds a 126 per cent drop in funding from the commercial banks to coal compared to 2018. There has also been a significant drop in the state-owned financing of coal projects. Lending to renewable energy projects saw a minor contraction of six per cent year on year although it received 95 per cent of the total lending to energy projects.
The report, prepared by the Centre for Financial Accountability (CFA) and Climate Trends, looked at 50 project finance loans across 43 coal-fired and renewable energy projects in India. Only projects that reached financial close between January 1, 2019, and December 31, 2019, were included in the analysis.
"A significant drop in project finance to coal means that financial institutes are beginning to realise the associated financial and reputational risk in investing in coal," said CFA Executive Director Joe Athialy.
"Our policy makers need to read the writing on the wall. Pushing healthy commercial banks into financing unviable coal projects in India and abroad will only lead to more stress in the financial sector," Athialy added.
2019 saw two coal projects (total capacity of 3.06GW) receiving Rs 1,100 crore ($190mn) in project finance. In 2018, five coal-fired projects with a combined capacity of 3.8GW received Rs 6,081 crore ($850mn).
By contrast, Rs 60,767 crore ($9.35bn) was lent to 17GW of coal projects in 2017.
Of the total lending to coal in 2019, Rs 700 crore went towards refinancing of JSW Energy's Barmer power plant in Rajasthan. This project was also refinanced in 2018.
Refinancing of projects almost always happens to change term conditions such as interest rates or maturity date. JSW Energy is among the progressive private power generation companies that announced a moratorium on construction of new coal power plants and focussed on expanding their renewable energy portfolio.
The remaining Rs 400 crore ($91mn) went towards financing NTPC's new coal project in Barh in Bihar. The project's engineering, procurement and construction responsibilities have been awarded to Doosan Heavy Industries.
NTPC, India's largest coal power operator, recently announced a moratorium on construction of new greenfield coal power plants.
