Businesses & Financial News

Chinese bank rescinds decision to finance US $1.2Billion Lamu coal plant

By Steve Umidha

Chinese lender, Industrial and Commercial Bank of China (ICBC) has reversed earlier plans to finance the 1,050MW Lamu coal plant citing environmental and social risks as key reasons for that decision.

New details are now emerging that ICBC will not commit 60 per cent of the project’s US $1.2Billion total cost – for a multibillion project that was expected to be the largest coal plant in East Africa and first in Kenya.

“While we are happy to hear this great news, we will continue our lobbying so that no new investor will be sought to fill the gap left by ICBC. We want the project not just suspended, but cancelled entirely,” stated Khadija Shekuwe, Save Lamu Coordinator – a community lobby group, which had opposed the project’s construction in its various petitions and complaints to ICBC expressing concerns over extensive environmental destruction and social risks that would be encountered once the project is operational.

The Lamu coal plant project has also seen other investors pull out since the cancellation of NEMA licenses, with the African Development Bank (AfDB) for instance announcing in November 2019 that it would pull out from the project.

According to project documents published by the project proponents, AfDB was expected to provide the Lamu coal plant with a partial risk guarantee for the project. Another potential investor for the project was General Electric (GE), which announced in September that it intends to shift its investment policy away from the new coal power market.

It has been argued that the proposed plant would have direct and indirect impact on the environment, social and cultural damage to Lamu Old Town, concerns that were also backed by UNESCO Heritage site.

Lamu Town is currently at risk of being delisted from the list of World Heritage sites due to similar concerns raised on the Coal Plant and LAPSSET project. The Lamu coal plant is part of the Lamu Port South Sudan-Ethiopia Transport (Lapsset) corridor. The plant had been expected to supply about 44 per cent of the country’s installed capacity of 2,400MW.

Kenyan banks in 2018 lost the opportunity to finance the $2 billion Lamu coal plant project because they lack the depth and tenor to fund large projects over an extended period because the Central Bank of Kenya (CBK) limits the amount banks can lend to a single individual/project on the basis of their capital ability.

The proposed plant is a public-private partnership (PPP), developed on a build-own-operate (BOO) basis by Amu Power, a special purpose joint venture of two Kenyan companies, Centum Investments and Gulf Energy.

The latest revelation from ICBC marks the biggest big blow to the project as it was expected that the bank was funding the majority of the US$2 billion expected development costs for the coal plant.

This might not mean the end of pursuit of coal, with Save Lamu also lobbying against proposed coal mining projects in Kitui County.

“Campaigns have been and will continue to be sustained to ensure a similar project is not proposed in other counties in Kenya as an alternative to Lamu. It is heartening to see myriad investors moving away from coal financing as renewables become more and more appealing economically,” said Omar Elmawi, coordinator for the deCOALonize Campaign.

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