Full Title: Structured Finance for Energy Transition: Building a Clean Energy Portfolio to Replace Mississippi’s Last Coal Power Plant
Author(s): Alex Hurley, Nachy Kanfer, David Posner, Ben Serrurier, Uday Varadarajan
Publisher(s): Rocky Mountain Institute (RMI)
Publication Date: May 13, 2022
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Structured finance — often called project finance or limited-recourse finance — is a common means of developing large, capital-intensive assets like power plants and pipelines. Project finance isolates risk at the project level and supports lending with long-term contracts that provide stable, predictable revenue.
When attached to a coal-fired power plant or other fossil asset, the same long-term contracts that give creditors assurance of debt repayment also insulate the facility from market forces that would otherwise justify its replacement with clean energy alternatives. This circumstance poses a barrier to cost-effectively mitigating carbon pollution.
In this report, we present a scenario for restructuring the contracts supporting the coal-fired Red Hills Power Plant in Mississippi, retiring the plant seven years early, and financing a replacement portfolio of clean energy.