KEPCO, apart from its existing operating coal power plants, is planning to expand its coal power generation capacity, completely contrary to the coal phase-out mandated by the Paris Agreement climate goal of limiting global temperature rise to below 1.5ºC. KEPCO has bought equity in and lended to fossil fuel projects across the Middle East, Asia and Africa, prompting BankTrack's partners to name it a "major global coal power developer".
Banks must rule out financing of KEPCO's recent increasing number of bond issuances, on the basis that the company is still heavily exposed to coal projects around Asia.
| Sectors | Coal Electric Power Generation, Coal Mining, Nuclear Electric Power Generation |
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listed on Korea Exchange & NYSE
As of December 2017 the Korean government holds 18.2% of KEPCO shares and the Korea Development Bank holds 32.9%. KEPCO's shareholder structure can be viewed here. |
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| Website | https://home.kepco.co.kr/kepco/EN/main.do |
KEPCO (Korea Electric Power Corporation), founded in 1898, is the largest electric utility in South Korea, responsible for 93% of South Korea's electricity generation. Together with its affiliates and subsidiaries, KEPCO has an installed capacity of 82.5GW, of which 32.5GW (39.5%) is coal and 17.5 (21.2%) is LNG. KEPCO owns or co-owns several power generating (including coal) operations overseas, including in Mexico, the Philippines, Saudi Arabia and Jordan. It is planning to expand its operations in South Korea, Botswana, China, Japan, Vietnam, Swaziland, South Africa and Russia.
Greenpeace reported on health issues attributed to coal use in the Philippines, one of the many countries in which KEPCO is active. The report explicitly references devastating health impacts in the island and city of Cebu, where KEPCO has a 60% stake in the coal-fired Cebu power complex. The report concluded that the, from just three existing coal power plants at the time of the study in the Philippines (of which Cebu was one), there were an estimated 960 premature deaths each year due to stroke, ischemic heart disease and other cardiovascular and respiratory diseases. This number would rise to 2410 in the event of eight more plants in the pipeline being constructed. The report estimated that the total annual emissions of the Cebu power complex (also called the Naga power station) releases significant annual emissions of harmful substances, including 5,040 t/a (tonnes per year) of sulfur dioxide, 3,635 t/a of nitrous oxide, and 401 t/a of particulate matter less than 10µm.
This figures above of premature deaths and severe health impacts are ultimately related to just one of the major coal projects that KEPCO develops. Other major KEPCO coal projects are Java 9&10 in Indonesia (ten times larger than Cebu by capacity) and Nghi Son and Vung Ang II in Vietnam (10 and 25 times larger, respectively).
According to the 2022 Coal Exit List, KEPCO has 36.5 GW of installed coal power capacity, accounting for 43% of its total power production. It is part of a group of 31 companies which are responsible for half the world's installed coal power capacity of 983GW. It thus represents a major player in the remaining vestiges of the global coal industry, the most urgent energy source to be rapidly and deeply cut for humanity to preserve a 50% likelihood of limiting global temperature rise to 1.5ºC.
Furthermore, the Cebu Naga coal plant uses outdated subcritical technology (lacking the pressure and temperature to convert water into a supercritical fluid, in which state water requires significantly less energy to power turbines). This means that KEPCO is actively involved in the financing of plants that are not only harmful to people's health, but also extremely inefficient and therefore having a much more severe impact on the climate through increased greenhouse gas emissions. Compared to the most updated coal-fire power technology, subcritical coal-fired power stations emit 75% more CO2 and use 67% more water.
KEPCO's coal projects are major sources of all of the emissions associated with coal power projects, including sulfur dioxide (SO2), which contributes to acid rain and respiratory illnesses, nitrogen oxides (NOx), which contribute to smog and respiratory illnesses, particulates, which contribute to smog, haze, and respiratory illnesses and lung diseases, carbon dioxide (CO2), which is the primary greenhouse gas produced from fossil fuels (coal, oil, and natural gas), mercury and other heavy metals, which have been linked to both neurological and developmental damage in humans and other animals, and fly ash and bottom ash, which are residues created when coal is burned at power plants.
KEPCO's major shareholder is the Korea Development Bank which holds 32.9% of KEPCO's shares. Between 2014 and 2017, 38 financial institutions provided a total of US $11.34 billion in loans and a total of US $11.63 billion in underwriting services. See KEPCO's financiers below.
KEPCO, a global powerhouse of coal financing, announced in May 2022 that it would sell its coal-fired power plants outside South Korea, but systemic economic pressures are more responsible for the policy change than an interest in sustainability.
The sell-off move was widely interpreted to have come about due to the company's record losses in the first quarter of 2022, spurred by the electricity price freeze announced in Korea as well as the financial losses brought about by the assets themselves. The Korean Government has a majority stake in KEPCO and as the state energy monopoly, the company has been heavily supported by the government, through subsidies and legislation to raise the company's debt ceiling. KEPCO has become more highly leveraged (the government voted to raise the company's debt ratio from two to six times its equity) and issued more bonds to combat the financial challenges it faces.
Meanwhile, the opportunity to shift away from dirty energy sources that KEPCO has been reticent to take was instead grasped by non-KEPCO-owned private power generation companies in Korea. They in turn have priced out the state monopoly, which has hemorrhaged money in loss-making coal and oil projects while losing out on the profits of renewable energy generation. All of this has implications for the low-carbon portion of South Korea's energy mix.
Ultimately, a combination of South Korea government policy and KEPCO's policy inertia has created a situation where KEPCO's interests are at loggerheads with the country's green transition. While KEPCO tries to stem its financial losses, its coal policies are woefully out-of-step with the Paris Agreement 1.5ºC goal; its 2050 coal phase-out target and restriction on new coal only applying international contradict the imperatives for a commitment not to invest in any new coal and to phase coal out by 2030 in OECD countries (of which South Korea is one).
