Case Study: Valuation of a Partially Constructed Thermal Power Plant Under IBC (2026)

This case study explains how a partially constructed thermal power plant admitted under insolvency was valued using a practical, recovery-focused framework. The assignment helped lenders assess completion feasibility, recoverable value, and disposal options under the Insolvency and Bankruptcy Code (IBC).

Background

A coal-based thermal power plant located in South India was admitted into insolvency following prolonged defaults in debt servicing obligations to its lenders. The project consisted of two power-generating units developed as part of a single power complex.

At the time of valuation:

• One unit was operational, having achieved commercial operations earlier

• The second unit remained under construction and had not commenced operations

The lenders appointed our team to carry out an independent valuation of the plant to support insolvency-related decision-making and recovery planning.

Purpose of the Valuation Assignment

The valuation was required to assist lenders in understanding:

• The realistic recoverable value of the project assets

• The financial implications of completing the unfinished unit

• Whether asset disposal or revival would maximise recovery

• The risks associated with contractual, regulatory, and operational gaps

The assignment demanded a valuation approach grounded in current realities, rather than original project assumptions.

The problem leading to impairment in value

• Any bidder who takes over the company has to deal with statutory approvals, terminated contracts, and partial PPA
• Absence of Fuel supply contracts
• PPA for another unit after completion
• Deterioration in plant & machinery
• Cost escalation

Key Challenges Impacting Valuation

The valuation exercise involved multiple interlinked challenges that materially affected asset value and marketability:

• Significant plant and machinery were imported, with original EPC and supply contracts no longer valid

• No Power Purchase Agreement (PPA) existed for the under-construction unit

• The timeline and cost required to complete the unfinished unit were uncertain

• Prospective buyers would be required to obtain:

  • Fresh statutory and regulatory approvals

  • Replacement EPC and vendor contracts

  • New or renegotiated PPAs

• Fuel supply arrangements were absent, increasing revenue uncertainty

• Prolonged idling led to physical deterioration of plant and machinery

• Completion costs were exposed to escalation risk due to inflation and market conditions

These factors significantly constrained investor appetite and influenced recoverable value.

Valuation Framework Applied

To address the complexity of the asset, the valuation was structured using a segmented approach:

Operational Unit

• Valued on a going-concern basis

• Considered existing operational capability and asset condition

• Reflected recoverable economic benefits under prevailing conditions

Under-Construction Unit

Assessed independently using two scenarios:

1. Completion Scenario
   Assumed completion of balance plant and machinery with revised cost and timelines

2. Recoverable / Piecemeal Scenario
   Focused on asset-level recoverability, reuse, or disposal potential

This dual structure allowed lenders to compare outcomes under revival and disposal alternatives.

Outcome and Decision Impact

The valuation framework enabled lenders to:

• Clearly distinguish between completion risk and recovery potential

• Evaluate the financial trade-offs between revival and disposal

• Base insolvency decisions on independent, defensible valuation inputs

Based on the valuation outcomes, lenders were able to take a firm and informed decision to dispose of the project assets in a manner aligned with maximising debt recovery.

Key Insights from the Assignment

• Partially constructed power projects require separate evaluation of completed and incomplete assets

• Recoverable value often diverges materially from historical project cost

• Contractual and fuel linkage risks play a decisive role in value determination

• Valuation judgment is critical in distressed infrastructure assets under insolvency

Relevance of This Case Study in 2026

• Insolvency-led asset sales are increasing across infrastructure sectors

• Lenders require realistic, recovery-focused valuations

• Thermal power assets demand careful assessment due to regulatory and market shifts

This case study demonstrates how structured valuation analysis supports decisive lender action in complex insolvency scenarios.

Require valuation support for stressed, partially completed, or insolvent infrastructure assets?
Our valuation Export  assignments support lenders, insolvency professionals, and investors in complex power and infrastructure cases where recovery and risk assessment are critical.

1. How is a partially constructed thermal power plant valued?

A partially constructed thermal power plant is valued by assessing costs incurred to date, condition and usability of assets, completion feasibility, regulatory risks, and recoverable value. Valuers typically use a segmented approach rather than relying solely on projected cash flows.

2. Is valuation mandatory for partially constructed power plants under IBC?

Yes. Under the Insolvency and Bankruptcy Code (IBC), valuation is required to determine fair value and liquidation value during insolvency proceedings. This supports lenders and stakeholders in resolution or liquidation decisions.

3. Can future cash flows be considered in such valuations?

Future cash flows may be considered only if project completion is feasible and commercially viable. In many cases, valuers also assess recoverable or piecemeal value due to uncertainty around funding, PPAs, fuel supply, and regulatory approvals.

4. How does absence of PPA or fuel supply affect valuation?

Absence of a Power Purchase Agreement (PPA) or fuel supply contracts significantly increases risk and reduces value. These uncertainties directly impact revenue visibility and investor appetite, often lowering recoverable value.

5. Who appoints the valuer in insolvency-related power plant valuations?

In insolvency cases, valuers are typically appointed by the Resolution Professional and must be Registered Valuers with relevant expertise in plant & machinery or infrastructure assets, as applicable under IBC regulations.