In its quest to build the largest electricity production plant, Amu Power picked up quite the ensemble of backers over the last decade.
The firms willing to put resources in the Lamu coal power plant ranged from one of the largest commercial banks in the world to a key development finance institution. They spanned Asia, Africa and North America.
Among them was China’s ICBC Bank, one of the largest in the world, which was to lend about half of the Sh200 billion required to build the plant that would produce 1,050 megawatts (MW) of power on completion.
South Africa’s Standard Bank, an affiliate of ICBC, was also going to fund the project.
The African Development Bank (AfDB) had at some point also considered financing the plant, while America's General Electric (GE) was to provide what it termed "clean coal technology," which would bring down pollution.
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The American firm was also expected to acquire a stake in the plant at a later stage.
Eight years on, Amu Power – a joint venture between Centum and Gulf Energy – appears to be the only believer in the project.
AfDB abandoned the project last year, citing a focus on clean energy. GE, which was expected to acquire a stake at a later stage, backed out in September, saying it plans to exit the coal power industry.
South Africa’s Standard Bank also quit the Lamu project, noting that it was scaling down investments in coal.
And now, ICBC, which had appeared to be the only one standing with Amu Power, has abandoned the project too.
Other than financing the project, the Chinese lender would also be the project’s lead bank and financial adviser for the project.
It was also critical in the overall architecture of the project, having mobilised a consortium of Power Construction Corporation of China (PowerChina) and Sichuan Electric Power Design Consulting to undertake construction works at the plant.
The departure of nearly all the partners that Amu Power banked on to build what would have been the largest infrastructure project in the country is also against the push by local and international environmentalists, who protested the building of a coal plant on the island, which is a Unesco World Heritage site.
It also comes on the back of the National Environmental Tribunal cancelling its environmental licence last year.
The court ruled Amu Power had not properly consulted Lamu residents when conducting the project’s environmental and social impact assessment, directing the firm to undertake the process again.
By the time of going to press, ICBC Bank had not responded to our queries on why it had pulled out of the project.
But the Chinese Embassy in Nairobi told local media that companies from the Asian country that had planned to invest in the plant held back after an apparent suspension of the project and that no single Chinese firm was involved.
Save Lamu, which is among the lobbies that have held long-running campaigns against the coal plant, also issued an alert that the lender had withdrawn its funding for the plant.
“We are happy and grateful to hear ICBC will no longer fund Amu Power for the coal project… we do not want a coal project in Lamu County and Kenya at large,” said Is’haq Abubakar, vice chairman Save Lamu.
Standard Bank had said it backed the 1,000MW Amu coal-fired power plant and in its 2015 annual report indicated that together with ICBC, it had concluded debt financing agreements with a consortium of Kenyan investors for the project.
The South African bank, which has a history of financing coal projects, however, had a change of heart and in 2017 pulled out.
Bitten by the green bug, Standard Bank said it would start reducing its carbon footprint annually as much as possible. In 2017, it said it would no longer be involved with the Kenyan coal plant.
“We reduce our own carbon footprint as much as possible each year. We have funded far more renewable energy generation than coal-fired power. We will apply very stringent conditions to any future funding of non-renewable energy,” said the bank.
ICBC holds 20.06 per cent shareholding in the South African bank.
By ICBC abandoning the project, it appears to be the last nail on the coffin for Amu Power as major financiers and stakeholders heed to a growing call for greener energy solutions.
In September this year, American conglomerate GE said it intends to exit the Lamu Coal power consortium two years after committing to pumping Sh50 billion in investment to the controversial coal-fired plant.
This was a departure from the agreement GE and Amu Power signed in 2018 to have GE Power, the firm’s energy subsidiary, supply the Sh200 billion power plant with generation equipment in exchange for a stake in the Chinese-built power plant.
“Under the Agreement, GE Power will design, manufacture and deliver its market-leading Ultra Super-Critical clean coal technology components (boiler and steam turbine generator) and air quality controls systems for the Lamu Coal Power Plant,” said GE Power Chief Commercial Officer Michael Keroulle at the time.
Amu Power and GE said the deal will enable the coal plant to improve operational efficiency and limit emissions of noxious gases emitted during its quarter-century lifetime.
“GE is providing the heart of the power plant and the environmental protection system,” said Francis Njogu, then managing director of Amu Power.
“Typically, this would cost anywhere between $450 million (Sh45 billion) and $500 million (Sh50 billion). Obviously, this is subject to a lot of detailed design that we will get into in the next phase.”
However, doubts have been raised that the "clean coal" technology proposed by GE would be able to filter the local emissions expected from the coal plant that include dust particles and noxious gases such as nitrogen oxide and sulfur oxide that cause air pollution and acid rain when released into the atmosphere.
Labelled by the government as a Vision 2030 project, Lamu’s coal power plant was expected to produce 1050MW of electricity upon completion – increasing the installed capacity by more than a third from the current 2,700MW.
The Sh200 billion power plant was earmarked for a 975.4-acre piece of land 21km north of Lamu town.
Local civil society groups have opposed the project because it would have harmful and irreversible effects on the ecosystem of Lamu County and rob thousands of farmers and fishermen of their livelihood.
The latest development indicates investors and financiers could be bowing to global pressure on cutting support to projects that will contribute to worsening the environmental challenges currently being experienced in many economies.
Last year, the United Nation’s cultural arm Unesco reissued a cautionary notice to the Kenyan government and developers of the Lamu coal-fired plant to reconsider the construction of the facility on a world heritage site.
Unesco said the government should first “assess the individual and cumulative impacts of the project on cultural and natural heritage, including the impacts on the outstanding universal value of Lamu Old Town and the ecological services that support the wider community of the property.
The government was given until February 1 next year to submit a report to the UN’s World Heritage Centre, detailing the state of conservation efforts on the property and implementation of protective measures should development of the coal plant proceed.
financial@standardmedia.co.ke
