Korea Electric Power Corp. approved a plan to participate in an Indonesian coal power project despite mounting global pressure to move away from the most-polluting fossil fuel.
The board of directors on Tuesday cleared the $51 million purchase of a 15% stake in the joint-venture developing the Jawa 9 & 10 project, according to a company spokesman. The company, known as Kepco, added that its involvement in the $3.86 billion project passed a pre-feasibility study last month by the Korea Development Institute, which must approve all investments by state-run firms above a certain threshold.
Pressure has mounted on governments and companies to ditch coal-fired power amid increasingly dire warnings of climate change and the need to transition away from carbon-emitting fossil fuels. Activists have also warned that if restrictive regulations emerge on greenhouse gas emissions, it could force such plants to close before they pay off their debts, leaving investors with so-called stranded assets.
BlackRock Inc., the world’s top asset manager, said in April that the South Korean company’s plans to invest in coal plants appear to contravene the utility’s energy transition commitments and are at odds with decisions by banks and other companies to exit the same projects. Kepco is also seeking to buy a stake in the Vung Ang 2 coal plant in Vietnam.
Market Forces, which lobbies financial firms and governments on environmental issues, said in a statement that Kepco’s decision is in contrast to the government’s Green New Deal platform, which is supposed to phase out overseas and domestic coal financing by public institutions. South Korea is crafting its new energy mix in the wake of the landslide election victory in April of President Moon Jae-in’s Democratic Party, which promised to end the country’s net carbon emissions by 2050.
Kepco said Tuesday that the joint-venture has a 25-year power purchase agreement with state electricity company PT Perusahaan Listrik Negara, as well as engineering, procurement and construction and operations and maintenance contracts with Doosan Heavy Industries & Construction Co. and PT Hutama Karya Persero. The Jawa units will have 1 gigawatt each of capacity.
The venture’s other partners include Indonesia Power, with 51%, and PT Barito Pacific, with 34%.
More than 70% of the total cost will be financed by loans from banks and financial institutions, including the Export-Import Bank of Korea and Korea Trade Insurance Corp., Kim Sung-whan, a member of South Korea’s National Assembly, said in a statement citing KDI’s non-public pre-feasibility study. Kepco and Barito will separately provide a shareholder loan of $250 million each, it said.