Activists praise AfDB for pulling out of Lamu coal plant 

Kenya’s quest to have a coal power plant has been shattered after one of the proposed project’s key financiers, the African Development Bank (AfDB), pulled out, bowing to pressure from environmental activists.

The pan-African development bank's exit is a big loss to Lamu County, which was banking on the Sh200 billion energy project to spur development, but a win for the environment.

ALTERNATIVES

AfDB President Akinwumi Adesina said at a conference in South Africa that the institution took environmental concerns seriously and would be focusing on renewable energy.

The bank has no plans to finance new coal plants in future, a move that has dealt a blow to Kenya, which planned to build a 1,050 megawatt plant. Several investors had expressed interest.

AfDB’s exit now leaves the Industrial Commercial Bank of China as the only financier. It had, in 2017, agreed to finance the project for $1.2 billion (Sh120 billion).

China Power Global later signed a $2 billion (Sh200 billion) deal with Amu Power Company Ltd for the coal plant, meaning, the investors will now have to seek alternatives for the remaining Sh80 billion cost that AfDB was supposed to foot.

AfDB’s pull-out comes barely three months after an American think-tank, Institute for Energy Economics and Financial Analysis (IEEFA), warned that the taxpayer was being forced into another Sh900 billion debt-trap, arguing that building the proposed 981-megawatt (MW) plant would force the taxpayer into a 25-year power purchase agreement (PPA) that would force electricity consumers to pay more to finance the project.

CAPACITY CHARGES

For now, the taxpayer has been saved the burden of paying at least Sh36 billion in annual capacity charges under the existing 25-year PPA, even if no power was generated at the plant.

The project has been dogged by controversies over the last three years, including environmental concerns surrounding the disposal of the coal waste, which activist said would cause more harm than good.

The Lamu coal plant was scheduled to enter commercial service in 2024 and is being built by Amu Power, a single-purpose entity owned 51 per cent by Kenyan firm, Centum Investments. 

The remainder of shareholding is held by Gulf Energy. The Amu Power consortium also includes Sichuan Electric Power Design and Consulting, China Huadian Corporation Power Operation Company and Sichuan No. 3 Power Construction Company.

MAJOR CONCERNS

The contract for the plant was awarded to Power Construction Corporation of China in 2016.However, construction has not yet started, having been dogged by environmental concerns.

A June ruling by the National Environment Tribunal (NET) saw the project’s licence cancelled, throwing the project's future into doubt.

Another interest in the project is the American firm General Electric, which in May 2018 bought a 20 per cent stake for $400 million (Sh40 billion) to design, construct and maintain the 1,050-megawatt plant. In the deal, the US firm was to help develop an environmentally-friendly and efficient plant.

The decision to withdraw funding has been welcomed by the Pan African Climate Justice Alliance (PACJA), a coalition of Civil Society Organisations (CSOs) pushing for climate and environmental justice.

VESTED INTERESTS

In a statement to media houses Thursday, PACJA Executive Director Mithika Mwenda called on China and other organisations still interested facilitating the project, to follow suit, and assist the country shift to newer, renewable and safer energy.

“This is a victory, not only for the people of Lamu, who have faced all manner of intimidation and profiling by vested interests, but also to the anti-coal movement across Africa and the world,” Mr Mithika said.

A total of 975 acres had been set aside for the project, which was expected to generate 1,050 megawatts of power upon completion.

Mr Mithika urged the government to embrace clean energy.