Nedbank stands out as the only South African bank that has taken an unequivocal policy decision to stop funding "dirty energy" amid mounting concern about climate change and environmental damage.
The bank confirmed last week that it would no longer fund the two proposed coal-fired energy plants — Thabametsi and Khanyisa — to be built by independent power
producers (IPPs).
"Nedbank is committed to a clean-energy future and as such will no longer provide project financing or other forms of asset-specific financing where the proceeds will be used to develop a new coal-fired power plant, regardless of country
or technology.
"This commitment includes round one of SA’s coal baseload procurement programme," said a Nedbank spokesperson.
Nedbank was the lead arranger on the Thabametsi project. The two projects are the first coal power stations that are to be built by the private sector.
Thabametsi, which is located in Limpopo, is being developed by Japan’s Marubeni Corporation along with black empowerment groups, including Royal Bafokeng Holdings and the Public Investment Corporation. Khanyisa in Mpumalanga is majority owned by Saudi firm Acwa Power, along with empowerment partners Thebe Investments, Pele Natural Energy and Mazi Capital.
Both projects have been included in the draft Integrated Resource Plan (IRP), the blueprint for SA’s long-term energy needs, even though the drafters conceded that renewable energy sources would be cheaper. The rationale provided by the department of energy when the plan was published last August was that the bids had already gone out and so the projects would go ahead.
However, neither has yet been able to reach commercial or financial close as both are subject to numerous legal and regulatory challenges. The environmental impact assessments for both are under review in the high court and water and atmospheric emissions licences also face objections.
The National Energy Regulator of SA has not yet granted generation licences. Nedbank’s decision to end funding of coal projects follows a lobbying campaign by Life After Coal, a coalition of environmental activist organisations including Earthlife Africa, the Centre for Environmental Rights and Groundwork. The campaign’s Robyn Hugo said the funding of "dirty, expensive and unnecessary" coal-fired electricity was in contradiction of the climate and sustainability commitments made by SA banks.
"We are vigorously contesting these projects for reasons that include their high climate, environmental, cost and health impacts. We have, over a long period, been speaking to banks, alerting them to these risks as well as to the reputational risk of financing these projects."
Despite the campaign and global trends in the financial sector to restrict the funding of fossil-fuels projects, other SA banks remain committed to funding coal projects.
The Development Bank of Southern Africa, which also originally committed to funding the coal IPPs, but whose mandate has expired, said last week that it would consider new proposals from the investors. While it was reported previously that Standard Bank would no longer fund coal projects, a spokesman would say only that all applications for funding were assessed in line with the bank’s coal-fired power finance policy.
"Standard Bank works with its clients and other stakeholders, including African governments and commercial and development financial institutions to provide funding for crucial infrastructure across multiple economic sectors.
"Standard Bank is committed to the need to balance Africa’s economic development and energy demand with climate-change mitigation and adaptation," said the spokesperson.
FirstRand said it would continue to fund coal projects, given the importance of coal to the economy. "RMB will continue providing financial services to the coal industry [including coal-fired IPPs].
"All transactions are subject to an enhanced due-diligence process, which includes a requirement that transactions/ projects adhere to regional, national, international and industry best practices," it said.
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