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Created on: 2016-12-09 11:49:13
Last update: 2017-12-07 12:31:38 BankTrack, Biofuel Watch, Dogwood Alliance, Markets for Change & NOAH (Friends of the Earth Denmark)
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About MGT Teesside biomass power station
MGT Teesside recently started building a 299 MW biomass power station at Teesport in the northeast of England. This will be the world's biggest purpose-built biomass power station. It will burn up to 1.5 million tonnes of pellets per year, made from around 3 million tonnes of green wood: wood that has been recently cut and therefore has not had an opportunity to dry by evaporation of the internal moisture. MGT Teesside has entered into a sourcing contract with Enviva, the biggest US pellet producer, for one million tonnes of pellets each year. NGOs and reporters have gathered evidence that Enviva is sourcing a significant proportion of their wood from the clearcutting of highly biodiverse coastal wetland forests on the North American Coastal Plain, which has been declared a Global Biodiversity Hotspot.
In 2009, the Department for Energy & Climate Change approved MGT Power's planning appication for this power station. In 2014, it furthermore approved a subsidies contract (Contract for Difference), which guarantees the company up to GBP 211 million in subsidies each year. Financial closure was announced in August 2016, with the Australian investment bank Macquarie and the Danish pension fund PKA A/S obtaining 50% equity each. Macquarie had by that time obtained GBP 900 million in investments for the project, including GBP 650 million in loans. In September 2016, the Finnish export credit agency Finnvera announced an additional GBP 100 million. Construction is to start within 2016.
What must happen
PKA and Macquarie should immediately divest their 50% equity stakes in MGT Power. PKA in particular prides itself on its responsible investment, as they have shown by divesting from 31 coal companies (source the Financial Times). Furthermore, private sector banks should avoid supporting this project.
The project cannot go ahead with the supply arrangements as currently planned, neither could a huge biomass power station like this be run in a sustainable manner. The project will need pellets and woodchips from almost 3 million green tonnes of wood a year. To compare, the UK's total wood production is only 10.8 million green tonnes a year.
In general, biomass power stations cause similar levels of air pollution to coal power stations of the same capacity. Using biomass as a fuel produces air pollution in the form of carbon monoxide, carbon dioxide, NOx (nitrogen oxides), VOCs (volatile organic compounds), particulates and other pollutants at levels above those from traditional fuel sources such as coal or natural gas in some cases (such as with indoor heating and cooking).
Apart from these impacts on people in the Teesside area, communities in the southern US by Enviva’s pellet plants will also be affected. Dogwood Alliance has worked with some of those communities to document the impacts from noise, traffic, pollution and, particularly worryingly, wood dust. Long-term wood dust exposure is carcinogenic according to the World Health Organisation, and it is also linked to allergic and non-allergic respiratory and nasal problems.
Forests play a vital role in maintaining clean water on which communities depend. They filter and store freshwater and they help to regulate regional rainfall cycles. This is particularly vital in a region such as the southern US, which is already seriously affected by extreme rainfall events (droughts and floods) that are exacerbated by climate change. Increased pressure on the remaining wetland forests of the region will thus put the local population at greater risk from the further disruption of the water cycle.
The UK is already burning significantly more wood in power stations annually than the country produces in total every year. MGT Power will source around 1 million tonnes of pellets (equivalent to 2 million tonnes of green wood) from Enviva, who are the largest US pellet producer and who are rapidly expanding their pellet capacity across southern US. US conservation NGOs, including Dogwood Alliance and Natural Resources Defense Council, have carried out detailed investigations of some of Enviva’s pellet plants. They have found that a high proportion of Enviva’s pellets is made from hardwood, which in the region is not found on tree plantations but only in biodiverse forests. By following logging trucks to the forest and back to an Enviva pellet plant, they have documented that whole trees clearcut in wetland forests are being turned into pellets which are then shipped to Europe, especially to the UK.
Coastal wetland forests in the southern US are one of the world’s most biodiverse temperate forest and freshwater ecosystems. They form part of the North American Coastal Plain biodiversity hotspot, which is home to 1,816 endemic species of vascular plants, 138 endemic species of freshwater fish, 57 endemic species of amphibians, as well as many endangered bird, reptile and mammal species. Enviva misleadingly describes whole trees from clearcut forests as ‘residues’ or ‘thinnings’, despite clear evidence to the contrary.
Applicable norms and standards
Other applicable regulations
PKA A/S has signed the Global Investors Statement on Climate Change.
Environmental campaigners in US and Denmark urge key investor to withdraw investment from large biomass power station project MGT Teesside
A large new biomass power station planned at Teesport has come under fire from US environmental campaigners, who have teamed up with Danish campaigners to persuade a key investor to pull their money out because of the serious effects the development would have on southern US forests and on the climate. Fourteen US organisations sent an open letter to the Danish pension fund involved in the scheme. Energy company MGT Power is planning to build the world’s largest dedicated biomass power station, MGT Teesside at Teesport in the UK. The US NGOs’ letter points out that the power station will source around 1 million tonnes of wood pellets from US pellet producer Enviva, which “has been well documented by organisations in the Southern US, as well as leading media outlets, to be sourcing whole hardwood trees from high biodiversity wetland forests for their pellets”. It further highlights that the region from which Enviva is sourcing wood has recently been designated a new global hotspot for biodiversity. The NGOs’ letter warns about the serious impacts which burning wood from clearcut forests in a power station has on biodiversity as well as on carbon emissions and the climate (source Biofuelwatch).
MGT Teesside biomass power station reaches financial close
Macquarie Capital and Macquarie Commodities and Financial Markets have reached financial close on GBP 900 million of funding for a 299MW biomass-fuelled combined heat and power plant on Teesside. Developed by MGT Power, Tees REP claims to be the world’s largest new-build biomass plant. Construction is due to start imminently and be completed by 2020. The project is located on a brown-field site adjacent to the Tees Dock near Middlesbrough. The total construction cost is approximately GBP 650 million, with a further GBP 250 million raised for working capital and operating costs (source newpower.info).
The project is financed with GBP 650 million debt and GBP 250 million equity. The GBP 650 million are loans obtained from Lloyds, Natixis, SMBC, Shinsei Bank, Development Bank of Japan, Korea Development Bank, Santander, Hastings City Bank, Edmund de Rothschild Asset Management, Finnvera, and Macquarie Bank, each likely to be 10 percent of the total loan. Macquarie acted as financial advisor raising the debt. Macquarie will own 50 percent of the equity in the project, with Danish pension fund PKA as an equity co-investor and partner who will own the remaining 50 percent stake (source Macquarie; GTReview).
Update: on December 1, Environmental Finance wrote that Macquarie Group "is understood to be in discussion to sell a stake in the world's largest biomass power plant", referring to the equity of this project. The stake is likely to be sold to a consortium of Korean investors, of which are reported to include Hana Financial Investment and NH-Amundi Asset Management.