This project is not yet fully funded, and is a no go for banks. It is closely tracked by BankTrack.
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 This project continues to promote outdated, heavily polluting and harmful fossil fuel technology.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.
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.
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.
The
Kusile power plant iscurrently 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 142011
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.
corporate loan: $ 500 million (November 2008) Non-sovereign loan to support Eskom capital expenditure programme source: South Africa Medupi Power Project.pdf
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: Additional R174bn In Guarantees For Eskom Seen As Part Of Bi...
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
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: Additional R174bn In Guarantees For Eskom Seen As Part Of Bi...
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: Idafjoe5br05n20091228
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: Idafjoe5br05n20091228
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: Idafjoe5br05n20091228
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
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) source: Eskom Press Release
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
advisory service: (April 2010) Advising Eskom on its funding options source: Content.aspx?id=108796
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: Additional R174bn In Guarantees For Eskom Seen As Part Of Bi...
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
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: Idafjoe5br05n20091228
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
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
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: Idafjoe5br05n20091228
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
project finance: $805 million (April 2011) The funding will pay for the engineering and construction services of Black & Veatch, a US- based company source: 22260
FoE US - A day’s journey through South African coal country
Blog post about a visit to see the area where several public and private banks are financing construction of a massive coal plant in South Africa (Kusile).
A blog describing a recent report on the cost of coal. To be found in the documents section of this profile, entitled " “Fossilized Thinking: The World Bank, Eskom, and the Real Cost of Coal"
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.