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Funding of two new coal IPPs in SA under threat

Two new coal independent power producer projects, Thabametsi and Khanyisa, are at risk of not being completed should funding be revoked.
Both Standard Bank and Standard Chartered Bank have announced that they will no longer be funding the construction of any new coal-fired power plants. Picture: Dean Hutton/Bloomberg

International and local efforts to restrict funding for construction of new coal-fired power plants are gaining momentum, and threatening financial closure of the planned two new coal independent power producer projects in South Africa, Thabametsi and Khanyisa.

In the latest development, it has been reliably learned that last week Standard Bank advised the director general of the South African Department of Energy (DoE), Thabani Zulu, of the bank’s new policy position to stop funding the construction of any new coal-fired power plants, in line with new Organisation for Economic Co-operation and Development (OECD) country protocols.

It is not clear at this time exactly how this will impact the funding by Standard Bank of construction of the Thabametsi and Khanyisa new coal IPP projects, which are currently included in the Draft Integrated Resource Plan for electricity, IRP 2018, for completion in 2023 and 2024. 

The Thabametsi 557 MW IPP, largely owned by Japan’s Marubeni and South Korea’s KEPCO, is to be built near Lephalale in Limpopo, while the Khanyisa 306 MW IPP is to be sited near eMalahleni in Mpumalanga, the biggest shareholder being Saudi-owned ACWA Power.

However, Standard Bank advised the developers of both Thabametsi and Khanyisa on Friday September 21, 2018 of its new corporate policy, and it is understood that further discussions and negotiations between the bank and the developers are ongoing at this time.

While Yousuf Haffajee, regional vice president of Marubeni Corporation, developer of the Thabametsi project, confirmed the meeting with Standard Bank on Friday last week, he added that: “I am unable to confirm or deny at this time whether Standard Bank will withdraw its financing”.

In response, a request as to how its new corporate policy position would impact its planned financing of the two new coal IPP projects in South Africa, Standard Bank said: “With respect to any specific transactions, we cannot provide further comment, given the confidentiality obligations between the bank and its clients”.

This new policy position by Standard Bank to stop funding new coal power projects should not be viewed in isolation. On September 25, 2018, Standard Chartered Bank announced it would cease providing financing for new coal-fired power plants anywhere in the world, in support of the Paris Agreement on climate change.

Standard Chartered Bank CEO Bill Winters said: “Recent developments in technology mean that alternative sources [of reliable power] are increasingly available to meet that need without the impact of coal-fired power on the environment.”

Financing of coal-fired plants has been added to Standard Chartered Bank’s prohibited activities list, which includes restrictions involving child and forced labour, trade in endangered wildlife, Arctic and tar-sands exploration, and production and conversion or degradation of high-value forests and peatlands.

Earlier, Japanese giant power plant project developer Marubeni Corporation announced on September 18, 2018 that it too was in the process of pulling out of coal-fired power generation, and that as a general principle, except for ultra-supercritical (USC) steam generation technologies, Marubeni would no longer enter into any new coal-fired power generation business.

Marubeni did however indicate its proactive involvement and expansion in the renewable energy generation business, and that it would strive to expand the ratio of power generated by renewable energy sources in its own assets from approximately 10% to approximately 20% by 2023.

But finance is not the only challenge facing the two new coal IPPs that have been “hard-wired” into the Draft IRP 2018 as a “policy adjustment”.  According to the Centre for Environmental Rights, both Thabametsi and Khanyisa are mired in multiple legal challenges that in all likelihood will continue for years.

Credible high court challenges (reviews of the environmental authorisations) are underway, and atmospheric emission licences, water-use licences, and generation licences for both projects are either outstanding or being challenged.

While Standard Bank is not the only financier of the planned Thabametsi and Khanyisa IPP projects, the big fear by the DoE and the developers is that if Standard Bank pulls its funding, the other South African banks, including Nedbank, Absa and FirstRand may follow suit, putting both projects at further risk of ever reaching financial closure.

Chris Yelland is investigative editor at EE Publishers.

COMMENTS   18

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This is excellent news!

What a muppet… lol

First real competition to Eskom to show the business case of private coal power and you happy its not going ahead… Wake up

leo malan I’d love for you to explain the logic behind this comment

Let’s rejoice. The loony left have infiltrated society to the point that banks are now making decision based on the left’s diabolical agenda. To be fair, it is a sound business decision. Any bank that lends money to such an venture will be slandered and boycotted in a similar vein to that which any business that had links to the Apartheid regime. They really have no choice. Coercion at its best.

Of course, nuclear being the sole viable alternative is also bad and will not happen. There is no untapped hydro potential in SA. Geothermal is not an option owing to low thermal gradients.

Nowhere in the world has any society established reliable affordable energy security that is based on solar and wind. Base load is a real construct. What will happen is decisions by the ANC led by their plethora of “experts” will result in the closure of coal fired power stations, installation of unreliable intermittent solar and wind resulting in an unstable grid and rocketing energy prices.

Then the middle class will be wiped out along with the final de-industrialisation of South Africa. Mines and factories will close en mass and unemployment will be even more rampant.

Only then will those who in a puerile fit of pique “unfriended” coal on social media realise what they have lost.

“Nowhere in the world has any society established reliable affordable energy security that is based on solar and wind.”
Um what??? Germany have officially planned to be on 100% renewable energy by 2050.
Not to mention the many farmers in the Drakensburg who already live purely off hydro and solar energy because Eskom refuses to supply them power.
Any earnest approach to this problem without interference from the oil powers would yield massive results. The problem is this has not been allowed…
This is without mentioning Akon Lighting Africa which is a mere 3 years since inception.

As far as I know the German experiment with solar and wind was a colossal flop. So much so they reverting to older methods. Maybe someone who know can tell us. Solar panel are only 25% efficient and batteries and converters are extremely expensive.

Germany: Natural Gas 12.1%, lignite 23.1%, Hard Coal 17%. That makes 52.2% dirty fuel to generate their power in 2016.

Nuclear is 13.1% – from France mostly
Clean sources: 30% – a looong way away from 100% – oh, and it’s 80% clean (not 100%) in 2050 – will be a stretch.
Google/wiki – just do it…

Oh, And 50 farmers in the Drakensberg vs 55mil other folks in SA that require/want/need/beg for electricity do not a solution make.

Don’t be ridiculous, Saibotkram1988.

“Nowhere in the world has any society established reliable affordable energy security that is based on solar and wind.”

The clue is in the word “established”. Past tense. Not 2050.

Now let us look at what they pay. Typically 30 Euro cents per kWh. This is about R5 per kWh. One Euro = R16.60. This would be more than three times what the average city dweller pays in South Africa. Affordable for the masses? yeah right.

The biggest con pulled on the poor in developing countries to pay their masters for “renewable” technologies to power their growth….

It is just sad, that drain on SA’s much needed capital, stolen like this..

Perhaps methane will come through eventually..

the “renewable” lobby group have no counter to it, it is cheap, plenty-full and cleanest burning natural resource available just here in Moz.

Yeah the cleanest of the worst, that doesn’t say much.

SA has some of the best solar irradiation in the world, parts of the Northern Cape have 6-7 sun hours a day for production!
Theoretically we can have almost half the installed capacity compared to our friends in Europe who on average only receive between 2-3 (Unless you live in a very southern part of Europe where you could get 3-4.5)

The only problem Solar has is that it is intermittent, and you then get left with the ultimate problem solar has, it is called the duck curve, where you will see when peak energy is required its usually at times where there is very little or no solar generation happening.

Solve the duck curve with a combination of Solar, Wind, Hydro and Pump storage and you are well on your way to renewable energy heaven, or well at least until we figure out how to hold a plasma long enough for cold fusion 😛

Really missing the point,

capital is the limiting factor in the developing world, ideas of how we should life are everywhere and the most expensive come from Europe and US in hard $$$.

You don’t have to use it immediately. Solar energy can be stored in battery banks for later use. Harvesting the energy is only one part of the story.

You guys are all living in the dark ages…coal is dead and as long as we insist on using it, the deeper into the dark ages we will retreat.
Costa Rica lives for 300 days of the year on alternate energy and will be completely self sufficient on wind and solar by 2020.
If South Africa committed to alternate energy sources, we would have the financial and psychological backing of the first world ( apart from the USA) and this would create enormous opportunities for our economy.
There is no country on the planet that is better equipped for solar and wind energy – we have both resources in loads,,,,
It just takes a mind shift

PS. ALSO THIS IS POSSIBLY MAKING WAY FOR AN AFRICAN RAINBOW ENERGY AND POWER INVESTMENT!

The coal defenders don’t understand real capitalism. There is big opportunity in battery storage so resources are being poured into it. Coal is yesterday’s solution. See the NY Times article – https://www.nytimes.com/2018/09/26/business/energy-environment/zinc-battery-solar-power.html?emc=edit_th_180927&nl=todaysheadlines&nlid=682744880927

Britain has already had three consecutive days coal power free. They do use nuclear and gas, but it also has the world’s biggest collection of off-shore wind farms – the economics and efficiencies of which improve with every installation.

Good! The last thing this country needs are more coal-fired power stations.

End of comments.

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