Lamu coal project now in limbo as AfDB backs out

The African Development Bank (AfDB) will not fund a coal-fired power plant project in Kenya and has no plans to finance new coal plants in the future, senior AfDB officials told Reuters.

The Abidjan-based lender published an environmental and social impact assessment in May for the Lamu project, which was planned near a UNESCO World Heritage Site but which was halted by a local environmental tribunal.

The project to build a 1,050-megawatt plant in eastern Kenya was backed by Kenyan and Chinese investors. Construction was originally planned to start in 2015.

Dozens of top banks, insurers and development finance institutions are restricting coal investments, as climate activists and investors voice growing concerns about the impact of burning fossil fuels, particularly coal.

AfDB President Akinwumi Adesina told Reuters at a conference in South Africa the bank took environmental concerns seriously and was focusing on renewable energy, adding that coal projects risked becoming “stranded assets” on the AfDB’s balance sheet. Wale Shonibare, AfDB’s acting vice president for energy, said the bank “did not move forward with the Lamu Coal transaction and had no plans to do so in the future”.

The AfDB president had told U.N. climate talks in September that the bank was “getting out of coal,” but he did not give a timeframe or specify whether the Lamu project would be affected.

The AfDB’s retreat from coal will make it harder for the Lamu project to progress.

Given go-ahead

The AfDB has been a major funder of coal projects in Africa. In the past decade, it has lent more than 1.5 billion euros ($1.65 billion) to South African utility Eskom for its Medupi coal plant and more than 50 million euros for the Sendou coal plant in Senegal.

It still plans to finance flue gas desulphurisation units at Medupi to mitigate sulphur emissions produced by burning coal.

This yet another major blow for Amu Power, which had been in advanced talks with AfDB on financing the project.

It was recently compelled by the Environmental Tribunal to redo the Environmental and Social Impact Assessment (ESIA).

The tribunal found that the firm had made major omissions while undertaking the ESIA and it was despite the environmental watchdog NEMA having cleared the firm and given it the go-ahead to start developing the power plant.

The proposed plant has been characterised by long years of litigation and other stumbling blocks that have made the fruition of the idea to have 1050 MW from coal-fired power plant seems to be an elusive dream for the country.

The Energy Ministry has backed the coal plant which it says will diversify electricity generation sources.

Additional reporting by Macharia Kamau