Kusile coal power plant South Africa pdf

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Protest banner against Eskom, the company in charge of the project. Source: www.sustainactmove.org
description

The Kusile coal fired power plant project is located in the province of Mpumalanga, in South Africa. With 4800MW, it will be one of the largest power plants of its kind in the world - and one of the largest industrial point sources of greenhouse gas emissions. This project continues to promote outdated, heavily polluting and harmful fossil fuel technology.


brief history

As of April 2011, the construction of the six-unit Kusile is about 21% complete and running a month ahead of a revised schedule, with no further delays expected. The company has said they are learning from their experience with Medupi to push the construction of Kusile even faster than expected. The R121-billion project, with an initial cost estimate of R81-billion, is expected to reach full capacity by the end of 2018.

Due to power shortages, in 2007 the South-African state-owned electricity company Eskom awarded contracts to build two identical coal-fired power plants. Known as Medupi and Kusile, each plant would have a generating gross capacity of around 4,800 MW.

The combined output of the plants would represent about 25% of South Africa's power generation capacity.  Both plants are currently under construction. The Medupi power plant is more advanced in terms of construction and finance.

The first unit of Kusile is planned for commissioning by 2013, and the other 5 units will follow with an approximate 8 months' intervals, with the last unit planned to be commissioned at the end of October 2016. The source of the coal will be supplied by Anglo Coal South Africa, part of mining group Anglo American.


what must happen

South Africa has abundant renewable energy resources, including onshore and offshore wind and solar power. These have been assessed by the Government, as part of the development of its climate policies.

Combined with energy efficiency measures and more decentralised energy provision, these resources offer the potential for South Africa to transition towards a low carbon power sector and economy, with appropriate financial support from developed countries.

-readmore-

The Government has recently introduced a feed-in tariff system designed to promote renewable energy generation. This policy is, however, at odds with the vision for power generation promoted by Eskom. It is considered a ‘fig leaf’ in South Africa, and most Research&Development is still being directed to coal (e.g. futile Carbon Capture and Storage schemes) and nuclear.

That is why the building of Kusile must immediately stop. All financial institutions involved have to stop immediately the financial services they contracted with Eskom as long they are used to build the Kusile power station. Banks should declare a moratorium in financing new coal-fired power plants as an urgent climate protection measure. Capital should instead be directed at energy efficiency and renewable energy financing opportunities.

Eskom should  engage in serious demand-side management, beginning by phasing out electricity to smelters that have little linkage with the South African economy and that are capital- rather than jobs-intensive.

Concrete plans should be made for a ‘just transition’, so as to provide alternative, well-paid ‘green jobs’ – e.g. in subsidised thermal-solar geysers for every house – to those workers who are employed at the smelters. At the same time, the special purchase agreements should be disclosed to the public and opened for renegotiation.

The freed up energy should be redistributed to provide for a much larger ‘lifeline’ supply of universal Free Basic Electricity – with a rising block tariff to encourage conservation to improve spinning margins which will buy time for a switch into renewable energy technologies. By not expanding its coal/nuclear facilities and instead redistributing the electricity capacity it has, and by simultaneously switching to renewable sources, Eskom can survive the financial and electricity access crises, and help the world solve the climate crisis. At present it’s Africa’s main contributor to both crises.


location
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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
social impact

Kusile will Create Local Population Displacement & Economic Harm :

  • The plant will require the relocation of 27-43 families (around 300 people). With the aid of the Expropriation Act Eskom can determine “appropriate” compensation value for the land required for the project. In a particularly cynical and Orwellian fashion the EIA suggests leasing back expropriated land to displaced farmers as a “mitigation measure” to reduce economic impact associated with the project.
  • Less than 50% of the economic benefit of this project will be accrued to South Africa as more than half of project financing will be spent on imported equipment and the hiring of foreign specialists. Currently, the poor in South Africa consume less than 5% of grid connected power, in contrast to the 38 largest corporations that consume 40%. In reality, the poor are paying far more per kilowatt for their electricity than export-oriented metals and mining industries that overwhelmingly benefit from these projects while repatriating the vast bulk of their profits abroad.
  • Energy prices were expected to go up by 12.69% for the year 2015-2016. However Eskom is planning a new application to increase this tariff to 25.3% as of July. It has asked for the tariff hike to keep the open-cycle gas turbines running and reduce load-shedding. The state-owned company has had to sell several non-core assets to increase their capital. It has a shortfall of R250bn and its energy grid has an operational reserve capacity of 1.3%. The energy rise will have an extensive impact on their customers and the rolling black-outs are likely to continue regardless. 

environment

Kusile will Significantly Contribute to Climate Change : The annual Green House Gas (GHG) equivalent emissions for this single project – 36.8 million tons - would increase South African energy sector emissions by 12.8% and the country’s total contribution to climate change by 9.7%. This despite the fact that South Africa already has the distinction of being amongst the top global greenhouse gas emitters per capita, and its energy sector is twenty times more CO2 intensive per unit of per capita GDP than even the USA’s. Despite the immensity of its climate impacts, the EIA dedicated less than 1 page of a 174 page document to the subject with no mitigation measures proposed. Financing of such a project is clearly not an appropriate choice for any lender's low carbon policy.

Kusile will also Lead to High Pollution and Health Impacts :

  • Sulphur Dioxide – According to the US Environmental Protection Agency, SO2 contributes to serious cardiovascular and respiratory illnesses such as asthma and heart disease, and can cause premature death. The project EIA demonstrates that the current ambient background Sulphur levels already far exceed permitted levels. The project  therefore will only serve to add to these dangerously high levels rendering the area unable to comply with internationally recognized limits for toxic sulphur emissions.
  • “The exceedances [of existing sources] were a factor of 6 times above hourly SO2 limits, for more than 200 hours per year; and 20 to 30 days per year…making it challenging for cumulative concentrations to be within limits regardless of the site selected, the stack height or the SO2 control efficiency implemented… even for the best case scenario, exceedances still increased by some 30% above the future base case scenario…Impacts on human health as a result of the additional emissions of SO2 are therefore deemed to have a high significance.”
  • Toxic Fly Ash – Fly ash from coal burning contains heavy metals and other toxics such as arsenic, uranium, and mercury, which can cause cancer, and neurological and developmental disorders. Approximately 1,000 ha of land would be required to accommodate a toxic above ground fly ash dump for the life of the coal fired power station i.e. 40 – 50 years. This dump “could have direct and indirect impacts on the aquatic environment…The impact would have a high magnitude and long term duration…accordingly a high significance impact is anticipated.”
  • Nitrogen Oxides – NOx can mix with other compounds to produce volatile substances and causes or worsens respiratory and cardiovascular illnesses such as emphysema, bronchitis, and heart disease, increasing hospital emissions and premature death. Despite the fact that this is a major pollutant produced from burning coal, the project completely avoids addressing specific mitigation measures for NOx pollution saying they are “…not considered in any further detail.”
  • Contaminated Water Supplies - The plant will require a supply of 17 metric tons of coal per year, which will stimulate demand for new environmentally harmful mines. This in turn will have an adverse impact on water quality and peoples’ health. Much of South Africa's coal is surface-mined poor quality coal, with high ash and sulphur content, which will require washing before being burned in the plant, thus adding burden on scarce water supply as well as causing more pollution.
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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
Mar 03, 2015

Medupi the identical power plant contruction to Kusile has started delivery to the South African electricity grid today. This after a delay of four years and at nearly double the initial budgeted project costs. 

Jul 01, 2013, Bond Issuance

In July 2013 Eskom Holdings issued new 10-year bonds with a total value of US$ 1,000 million. The proceeds of the issuance were used for general corporate purposes. Both Barclays and Citi assisted with the issuance of these bonds, underwriting them for US$ 500.0 mln each. It is assumed that half of the bond issuance was devoted to the Kusile power plant and the other half to Medupi. 

Aug 18, 2011

The Kusile power plant is currently threatened due to a 25 percent rise in electricity tariffs. It has been said that at 33c/kWh, Eskom is not covering its operating costs. Eskom also has raising costs in their capital expenditure programme. The forecasts of the programme have risen from R84-billion in 2005 to R385-billion. In order to deal with the financial issues faced by Eskom some solutions have been given such as a loan levy, a review of Nersa's tariff decision, extra equity investment by the government and increasing government guarantees for Eskom debt.After weeks of protests at both Medupi and Kusile power plants, the Medupi power plant resumed operation on Monday May 23, 2011. Kusile is only partially resumed while talks continue to end the protests. The protests began when foreigners were hired as welders while other local contacts were being ended. To read more about the protests go here.

On Thursday April 14 2011 the Board of Directors of the U.S. Export-Import Bank (Ex-Im Bank) voted to approve $805 million in subsidized financing for the project.

Eskom said last December it had signed loans totalling 705 million euros ($917.5 million) from German and Japanese banks as well as obtaining some funds from South African banks. The loans are repayable over 12 years, starting six months after units of the plant are commissioned, it added.

The utility is now looking for more financing to complete the 4,800 megawatt Kusile plant, but it has not said how much was needed.

image
active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
This project is not yet fully funded, and is a no go for banks. It is closely tracked by BankTrack.
financial institutions involved
multilateral development banks
  • African Development Bank - international -
    The African Development Bank is an African multilateral bank with mission to promote sustainable economic growth and reduce poverty in Africa.
    • corporate loan: US$ 500 million (November 2008)
      Non-sovereign loan to support the capital expenditure program of Eskom. Proceeds of the loan were used for Medupi and Kusile
      source: Thomson One Database, Tearsheet 2415629115, 12 November 2008;
  • Development bank of Southern Africa South Africa
    The Development Bank of Southern Africa (DBSA) is a state owned entity with the purpose of accelerating sustainable socio-economic development and improve the quality of life of the people of the Southern African Development Community (SADC) by driving financial and non-financial investments in the social and economic infrastructure sectors.
    • corporate loan: US$ 2.17 billion (November 2010)
      This loan will be drawn over five years and does not utilize guarantees from the South African Government. The loan was mainly used for the Medupi and Kusile coal-fired power stations and the Ingula Pump Storage scheme with its associated transmission infrastructure.
      source: Development Bank of Southern Africa
banks
  • Bank of America United States - profile
    • advisory service: (October 2010)
      Merrill Lynch to help it with the design and implementation of what will be a multibillion-rand international bond programme, which could kick off in the US early 2011
      source: www.engineeringnews.co.za
  • Bank of Tokyo Mitsubishi UFJ Japan - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • Barclays United Kingdom - profile
    • advisory service: (October 2010)
      Absa to help it with the design and implementation of what will be a multibillion-rand international bond programme, which could kick off in the US early 2011
      source: www.engineeringnews.co.za
  • BNP Paribas France - profile
    • corporate loan: Part of € 1,185 million syndicated loan (December 2009)
      ECA/Coface-covered loan to fund turbine contracts with Alstom for the Medupi and Kusile
      source: af.reuters.com
  • Crédit Agricole France - profile
    • corporate loan: Part of € 1,185 million syndicated loan (December 2009)
      ECA/Coface-covered loan to fund turbine contracts with Alstom for the Medupi and Kusile
      source: af.reuters.com
  • Credit Mutuel-CIC France - profile
    • corporate loan: Part of € 1,185 million syndicated loan (December 2009)
      ECA/Coface-covered loan to fund turbine contracts with Alstom for the Medupi and Kusile
      source: af.reuters.com
  • Credit Suisse Group Switzerland - profile
  • Deutsche Bank Germany - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • FirstRand Bank Ltd South Africa - profile
    • approached/interest: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE). Rand Merchant bank participated in the loan and is a wholly owned division of FirstRand Bank Ltd.
      source: Eskom Press Release, 11 December 2009
  • HSBC United Kingdom - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • JPMorgan Chase United States - profile
    • advisory service: (April 2010)
      Advising Eskom on its funding options
      source: www.businessday.co.za
    • advisory service: (October 2010)
      Help it with the design and implementation of what will be a multibillion-rand international bond programme, which could kick off in the US early 2011
      source: www.engineeringnews.co.za
  • KfW IPEX-Bank Germany - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • Natixis France - profile
    • corporate loan: Part of € 1,185 million syndicated loan (December 2009)
      ECA/Coface-covered loan to fund turbine contracts with Alstom for the Medupi and Kusile
      source: af.reuters.com
  • Nedbank Group South Africa - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • Rand Merchand Bank South Africa
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
  • Société Générale France - profile
    • corporate loan: Part of € 1,185 million syndicated loan (December 2009)
      ECA/Coface-covered loan to fund turbine contracts with Alstom for the Medupi and Kusile
      source: af.reuters.com
  • Standard Bank South Africa - profile
    • corporate loan: Part of € 705 million syndicated loan (December 2009)
      ECA/Euler Hermes-covered loan used to fund part of the foreign content of the Kusile boiler contract with Hitachi Power Europe (HPE)
      source: Eskom Press Release
export credit agencies
investment funds

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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
norms and standards

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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal

The following companies are involved in Kusile coal power plant:

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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
2015 2014 2013 2012 2011 2010
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active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
image
active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
videos

Eskom mulls foreign investor conditions for Kusile transaction following road shows
Feb 10, 2011 - The Asian, European and American investors canvassed during a recent week-long Eskom road show about the prospect of taking an equity position in the R141,5-billion Kusile power project expressed "excitement", but also set down several provisos for any such transaction.

Eskom to sell up to 30% of Kusile in bid to secure up to R40bn in private equity
Feb 10, 2011 - South Africa's State-owned power utility Eskom would issue a request for proposals within weeks of its final December board meeting for an adviser to support it in securing up to R40-billion in project equity finance for its R142-billion Kusile coal-fired project.

WWF calls on Eskom to defer Kusile project
Feb 10, 2011 - The World Wide Fund for Nature (WWF) South Africa on Monday called on the government and State-owned enterprise Eskom to reconsider plans to complete the construction of the Kusile power station, in Mpumalanga, as the new coal-fired plant would add significantly to the countrys carbon emissions.

image
active file
last update: Jul 28, 2015

sectors
energy plants - coal

banktrack contact

Yann Louvel, Climate and energy campaign coordinator, BankTrack


working partners

Bobby Peek, Director, GroundWork (FoE South Africa)

Sunita Dubey, GroundWork (FoE South Africa)


member groups involved

share this dodgy deal
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