Quantifying Climate Risk Premium in Coal power plant: A case study of Samchoek Power Plant
PLANiT built the Climate Risk Premium (CRP) model, which re-prices an asset's value by applying both physical and transition risk. The analysis found that Samcheok Blue Power's credit rating, currently A+, could fall to the lower end of investment grade or into speculative grade depending on the scenario.
Summary In February 2026, Samcheok Blue Power's bond offering was oversubscribed and upsized to 150 billion won, pricing inside the market curve, even as rating reports flagged its exposure to Korea's decarbonization policy and chronic transmission constraints. Rating agencies acknowledge these climate risks but have not quantified their financial impact, leaving bond investors without any basis for pricing them. That information gap is the central problem this report addresses. PLANiT Institute built a Climate Risk Premium (CRP) model to quantify these risks and map their impact on Samcheok Blue Power's credit rating and cost of capital. The dominant risk is transition risk: with Korea set to phase out coal by 2040, this plant, online only since 2025, would close well short of its economic life. Across scenarios that incorporate climate risk, the credit rating deteriorates from its current A+ to the BBB-to-BB range, and the most severe scenario projects the company sliding into D-rated, stranded-asset territory by 2039. With leverage already above 500%, rating deterioration compounds itself as rising funding costs feed further downgrades. The implication is that an A+ rating should no longer be read as a clean bill of health. Investors should reprice the asset to its true climate-adjusted cost of capital, and policymakers should recognize that ambiguity in the coal phase-out timeline itself generates a risk premium that a concrete schedule would reduce.