Ignoring international protests and warnings by institutional investors, the board of majority state-owned Korea Electric Power Corp (Kepco) yesterday approved the company’s purchase of a substantial stake in the planned 1,200-megawatt Vung Ang 2 coal power plant in Vietnam.
Critics decried the decision as "deplorable", "devastating", and hypocritical in light of the new South Korean government’s recent declaration of a climate emergency and its commitment to a Korean Green New Deal, which is intended to avert 12.3 million tons in emissions.
They say that reduction would be eclipsed by the more than 200 million tons of greenhouse gases Vung Ang 2 will emit over its 30-year life span.
South Korea will not be able to shed its title of ‘climate villain’– Joojin Kim, Solutions for our Climate
Kepco will invest some $189m in the project, which has a total price tag of $2.2bn.
Selling the stake is China Light and Power Ltd., which decided to withdraw from coal investments in December.
The South Korean government’s own overseas investment auditor, the Korea Development Institute (KDI), has warned that Vung Ang 2 could lose money as the cost of renewables falls, leading to a loss for Kepco that would be borne by Korean taxpayers.
In June, the KDI calculated that Vung Ang 2 was at risk of losing around $158m over its lifetime, which translates into a net loss for Kepco of some $80m.Â
Kepco also this year decided to invest in a new coal plant in Indonesia, which the KDI said could be a money-loser as well.Â
Citing financial and environmental concerns, global investors including Blackrock, Legal & General Investment Management, APG, and the Church Commissioners for England have all warned Kepco to stop funding overseas coal power projects.
Electronics giant Samsung has also faced international protests because the conglomerate’s construction arm, Samsung C&T – along with South Korea’s Doosan Heavy Industries & Construction – are being lined up to build the Vung Ang 2 facility.Â
"It is deplorable that Kepco chose to invest in a Vung Ang 2 while other investors and lenders are withdrawing from this project," Sejong Youn, an attorney and head of coal finance at environmental organisation, Solutions for Our Climate, told GCR.
"KEPCO’s investment in this project is almost certain to result in a significant loss, and interfere with Vietnam’s recent energy policy initiative to transition towards renewables."
Reacting to the news yesterday, Joojin Kim, managing director of Solutions for our Climate, said: "Decisions like Kepco’s today are devastating to our climate and fly in the face of Korea’s recent ‘climate emergency’ declaration.
"Emissions from the Vung Ang 2 coal power in Vietnam project, which will add more than 200 million tons of greenhouse gas emissions to our atmosphere, eclipse the 12.3 million tons in emissions reductions expected from the newly announced Korean Green New Deal."
With South Korea named as among the world’s top three funders of overseas coal plants, Kim added that Kepco’s decision "shows how far South Korea’s climate talk is from its walk".
"South Korea will not be able to shed its title of ‘climate villain’," he said.
Also weighing in against Kepco were UK officials organising 26th UN Climate Change Conference of the Parties (COP26) scheduled for Glasgow in November 2021.
Nigel Topping, who leads private sector engagement for the event, tweeted: "This will be bad for climate, soon become a stranded asset, waste SK taxpayer’s money and badly damage reputation of all players."
The UK’s COP26 envoy John Murton asked: "Why lose money building new coal that makes tackling climate change harder?"Â
As well as Kepco, South Korea’s Export-Import Bank and the Korea Trade Insurance Corporation are expected to provide financing for the venture.
Image: A coal-fired power plant in The Netherlands (Adrem68/CC BY-SA 4.0)