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Last update: 2017-09-18 15:24:52 BankTrack
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The proposed Lamu Coal Power Station is a 1,050 MW coal-fired thermal power station which would be located on Kenya's Indian Ocean coast, 20km from Lamu’s islands and historic Old Town, a UNESCO World Heritage site. The project sponsor is the Amu Power Company, which has a power purchase agreement with electricity distributor Kenya Power. The project is expected to cost USD two billion and to be operational in 2020.
In 2013, the Government of Kenya initiated plans for developing the Lamu Coal Power Plant. The proposed plant was scheduled to generate 1,050 megawatts of coal-fired thermal power on 865 acres of land at Kwasasi, Lamu County.
In January 2014, the Government of Kenya invited bids from private developers to build, own, and operate the power station. In September 2014, the development rights were awarded to a consortium consisting of Gulf Energy, a Kenyan energy generating company, Centum Investments, a private equity firm, headquartered in Nairobi, with investments in Kenya and Uganda and Sichuan Electric Power Design and Consulting Company Limited, a subsidiary of Power Construction Corporation of China.
What must happen
The Paris Climate Agreement goals require a managed decline of fossil fuel production. The construction of new coal fired power plants is not compatible with such a managed decline. Banks must immediately stop financing new coal-fired power plant developments anywhere in the world. As such, Standard Bank and ICBC should steer clear of financing this project.
Lamu’s communities are confronted with their most serious threats to date: large-scale extractive industrial projects. Lamu residents’ ability to have a voice in dictating how its land and natural resources are exploited, and how its development proceed, will play a significant role in the continued existence of the Lamu community and its means of livelihood.
Lamu is home to the oldest and best preserved Swahili settlement in East Africa, Lamu’s old town is a UNESCO World Heritage site and an epicenter of Indian Ocean trade for centuries. Yet Lamu Island’s 24,000 residents are faced with what many call an existential crisis. The Lamu coal power project is controversial in part due to the risks it poses to Lamu’s delicate marine environment, which many fear will harm its two most vital industries: fishing and tourism.
The Lamu coal-power plant alone would exceed all of Kenya’s existing emissions from fossil fuel plants and would be one of the worst emitters of GHG on the entire African continent. The project raises great concerns about its impact on the environment regarding toxic pollution from coal and ash, carbon emissions by the coal power plant and rising sea levels due to climate change.
Ernest Niemi, an economist and president of Natural Resource Economics, who has done studies on coal plants across the world for over 40 years, said operating the AMU power coal plant to produce electricity will be cheap for the developers but expensive as an energy source to consumers and detrimental to the society in general. Testifying before the National Environmental Tribunal in Nairobi in June 2017, the US-based consultant said Kenya will incur a massive health burden coupled with deaths with the operation of the plant. Studies across the world, he said, show that the social cost of running coal-fired power plants exceeds the economic benefits (source The Star).
For generations, the indigenous and traditional communities of Lamu, Kenya — merchants, hunter-gatherers, farmers, pastoralists, fisherfolk, boat builders, mangrove harvesters, and more recently tour guides — have managed their land and shared natural resources and cultural traditions, in spite of losses due to insecure land tenure and political marginalization. This system of informal communal management of land has been critical to Lamu maintaining its remarkably pristine and historically and naturally rich ecosystem, including significant forest cover, biodiversity, coral, threatened species like sea turtles, and 70% of the country’s mangroves — a notable asset for the country and region, and a carbon sink for the world (source medium.com/@deCOAL).
The Lamu coal power plant is part of the country's plan to modernise its electricity system and shift away from costly diesel generators. A recent study by Bloomberg however shows that renewable energy is about to become cheaper than coal, and the Lamu plant is therefore likely to become a financial liabity sooner than 2050. This not only emphasises that a new coal power plant would not make sense, it also shows that it will be a riskful investment for any bank.
The Save Lamu Coalition has written an open letter concerning their security, given intimidation and interference that their communities are facing in accessing and sharing information about major development projects in the Lamu community such as the Lamu coal power plant.
The Lamu coal power project is part of the immense LAPSSET (Lamu Port-South Sudan-Ethiopia-Transport) Corridor project. Elements of the USD 20 billion LAPSSET project include an oil and gas pipeline from northern Kenya to the coast, a 32-berth USD 5 billion port at Lamu, the USD 2 billion coal plant at Lamu currently under consideration, and significant additional infrastructure, including highways, railways, and a resort city. Community groups argue that there has been little consideration of the project’s high potential to irrevocably harm the ecosystem, its biodiversity, and the human communities that depend on it for their lives.
CategorisationThis project is a Category A project according to the criteria of the Equator Principles.
This project is located in a so called non designated country. A project that is situated in a non-designated country must be in compliance with all relevant host country laws, regulations and permits, as well as all applicable IFC Performance Standards on Environmental and Social Sustainability (Performance Standards) and the World Bank Group Environmental, Health and Safety Guidelines (EHS Guidelines).
The Equator Principles require that the project sponsor makes the following documents publicly available:
Climate change impact
This project is expected to generate more than 100,000 tonnes of C02 equivalent per year. The client is therefore obliged to report publicly on an annual basis on GHG emission levels (combined Scope 1 and Scope 2 Emissions) during the operational phase for Projects.
Other applicable norms and standards
Petition filed at the Environment & Land Court of Kenya
The petition essentially asks for the court to determine whether or not the Energy Regulatory Commission has granted an Electricity Generation Licence to Amu Power Company Limited to build the proposed 1,050 MW coal fired electric generating unit and to to make full disclosure of the secretive Power Purchase Agreement (PPA) into which it entered.
Coal-fired plant gets greenlight from ERC
The Energy Regulatory Commission (ERC) has approved the construction of Kenya’s first coal-fired power plant in Lamu after rejecting objections to the project by a community-based organisation (source DailyNation).
Lamu County puts coal-fired power plant on hold
The Lamu County Assembly has rejected an environmental and social impact assessment report by investors on a proposed Sh200 billion coal-fired power plant. The assembly wants the project owners to come up with a resettlement plan for residents who will lose their land to the project.
Standard Bank to finance Centum’s USD two billion coal plant
South Africa’s Standard Bank has signed a deal to finance a USD two billion (KES 200 billion) Centum Investment-backed coal plant in Lamu. The Johannesburg-based lender says it has teamed up with Industrial & Commercial Bank of China Ltd (ICBC) to fund the project which is backed by a consortium of local firms under the investment vehicle Amu Power Company (source Business Daily Africa).
The project is valued at USD 2 billion and will be financed through debt of USD 1.5 billion and shareholder equity of USD 500 million (Business Daily).
Standard Bank is listed as co-financier of the project, as based on several statements in the press (here and here and here) and in Standard Bank's annual report 2015 (page 47). However, in a meeting with South African civil society groups at their Johannesburg offices on 11th September 2017, Standard Bank denied that it is involved in the project.
On October 16 2017 Standard Bank confirmed that it will not fund the proposed coal-power plant in Lamu.