Report: State of Korean Public Financial Institution Support of Coal Power

Solutions for Our Climate (SFOC), an environmental group focusing on climate and air policy based in Seoul, Korea, released a new report (Korean/English) on the state of coal power project support by Korean public financial institutions. The report reveals that these institutions spent nearly USD 17 billion in coal power projects after 2008 - about half of which was for coal-fired power plants outside Korea. Before going into the details, first, a couple of points summarizing the state of coal power in Korea.

Korea Coal Power Snapshot

·       Domestically, eight new coal power units (7GW) were commissioned in 2017 alone, and seven more units (7GW) are in the pipeline (see Table 1).

·       Internationally, third in the world, following Japan and China, in terms of international coal finance.

·       Despite commitments to phase-out domestic coal, coal is still thriving in the new Administration. Despite having legal grounds to cancel, the Moon Administration recently issued one of the  final permits of a 2GW project. Furthermore, the Administration’s plans to decommission coal power plants are merely a continuation of plans already set during the previous administration.

·       Overseas coal projects continue despite administration change. Five months into the new administration, project finance loans for the controversial Cirebon 2 coal project were disbursed, and KEPCO, the Korean government owned utility entered into the concession agreement for the Nghi-Son 2 coal project.

<Table 1. New Coal Power Projects authorized after 2008>

Public Financial Institution Support of New Coal

SFOC’s new report shows how Korean public financial institutions contributed to the proliferation of coal.  

·       Financing for Domestic Coal Projects. The National Pension Service (NPS, USD 2.2 billion), Korea Development Bank (KDB, USD 1.7 billion) and Nonghyup Financial Holdings (USD 3.4 billion) have contributed the most in financing domestic coal projects.

<Table 2. Korean Public Financial Institution Support of Domestic Coal Power Plants>

·       Financing for Overseas Projects. Korea Export Import Bank (KEXIM) and Korea Trade Insurance Corporation (K-SURE) have supported the most. Specific projects they have participated in are as below.

<Table 3. Korean Public Financial Institution Support of Overseas Coal Power Plants>

<Table 4.  KEXIM Financing of Overseas Coal Power Plants>

<Table 5. K-SURE Financing of Overseas Coal Power Plants>

Policy-Maker Response

·       Extensive Criticism at National Assembly. Our findings have led to legislator questioning of the Minister of Trade, Industry and Energy, the Presidents of KEXIM, KDB, NPS and KEPCO during the 2017 National Audit at the National Assembly. Such questioning was one of the most important reasons KDB, which was originally planning to finance the 1GW Dangjin EcoPower project, withdrew its plans to finance the project, subsequently leading to its cancellation.

·       Legislators move to restrict coal financing. Legislative bills restricting KEXIM, KDB and NPS financing of coal power projects have been proposed to the Korean National Assembly. The bills, if passed, will impose substantial political pressure on public financial institutions, by sending a clear message to such institutions to stay away from coal power investments.

Going Forward

·       Financing of several domestic and overseas projects expected during 2018.  Several new coal power projects will be seeking financing during 2018, and should be on the watch. Domestically, the Gangreung Eco-Power project and the Samcheok PosPower project will be seeking financing arranged by KB Kookmin Bank and KDB, respectively. The Nghi-Son 2 Project in Vietnam will seek financing from KEXIM and the Nam Dinh 1 project as well.

·       Our Plans. SFOC will closely monitor the state of financing of these projects. In order to prevent such financing, we will show financial institutions that such investments may turn out risky due to stronger climate and air quality regulations and the removal of schemes practically subsidizing coal power. We will also publicize the human rights violations and environmental harms that the overseas projects may potentially cause.