Investment

Environmental groups target South Korea’s bailout of coal-fired power plant builder

  • Environmental groups are seeking an injunction against a 1,000 billion won ($ 825 million) bailout by the South Korean government for Doosan Heavy Industries & Construction Co., a builder of coal-fired power plants.
  • They say the company’s financial woes predate the COVID-19 crisis the bailout is supposed to address, and also that the bailout runs counter to South Korea’s commitments to climate and public health.
  • Eighty percent of Doosan’s revenue comes from building coal-fired power plants, including heavily polluting plants in South and Southeast Asia, where it is subject to less stringent air pollution standards than South Korea.
  • The injunction seeks to force the government to condition the bailout on Doosan’s transition from coal to renewable energy technologies; But at a shareholders’ meeting days after the bailout decision, the company said it wanted to maximize revenue from its core business, coal, before jumping into new businesses.

Environmental groups are seeking an injunction against a decision by South Korea to bail out a coal-fired power plant builder, saying the bailout goes against the country’s climate and public health commitments.

The Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM) on March 26 granted an emergency loan of 1,000 billion won ($ 825 million) to Doosan Heavy Industries & Construction Co. stimulus for businesses affected by the COVID-19 pandemic.

But the move has been criticized by environmental watchdogs, given that most of Doosan’s income comes from building coal-fired power plants.

“These decisions to support Doosan Heavy have significant environmental and health consequences,” environmental groups from South Korea, Indonesia and other countries wrote in a statement. joint letter submitted April 8 to South Korea’s Ministry of Economy and Finance.

Environmental activists in South Korea are protesting the government’s decision to bail out coal-fired power plant maker Doosan Heavy. Image courtesy of Greenpeace.

They said Doosan’s financial problems were not directly caused by the COVID-19 pandemic. They noted that between 2010 and 2019, Doosan’s credit rating went from A + to BBB and its stock price fell 93% – “long before COVID-19 was an apparent crisis,” reported they wrote.

“While COVID-19 is certainly a pandemic, the situation should not be exploited by Korean companies to worsen the climate crisis and air pollution – which are equally deadly threats to humanity and our economy.” , wrote the groups.

Eighty percent of Doosan’s revenue comes from coal-fired power plants at home and abroad, including two projects on the island of Java in Indonesia, the groups said. South Korea’s overseas coal-fired power projects use the country’s advanced technology, but are still several times more polluting than South Korea’s because they take advantage of countries’ more lax environmental regulations. South and Southeast Asia to reduce construction and operating costs, the groups mentioned.

South Korean public financial agencies such as KDB, KEXIM, and Korea Trade Insurance Corporation (K-Sure) are already responsible for financing coal-fired power plants which are estimated to cause up to 151,000 premature deaths in countries like Indonesia, Bangladesh and Vietnam, according to a Greenpeace report released last year.

The Suralaya coal-fired power station in the city of Cilegon, Indonesia. Image courtesy of Greenpeace.

Sejong Youn, lawyer and director of South Korean NGO Solutions for Our Climate, one of the groups that filed the injunction, said the government should exercise tighter control over Doosan’s restructuring if the bailout is implemented.

The groups call on the government to refrain from providing additional financing to the company, but to provide financial support only on the strict condition that the company uses this support to restructure its business away from coal power and towards renewable energy technologies.

“Without a concrete plan, there is a huge risk that public funds will simply be wasted on paying off the debt Doosan Heavy has accumulated because of his bad business decisions,” Youn wrote in an email to Mongabay.

He added that the bailout decision was linked to the fact that Doosan is a large company that accounts for a significant portion of the economy of Southeast South Korea’s “heavy industry belt”, employing around 6 people. 700 people. Youn said the administration is facing political pressure in this situation because there is a perception that Doosan is in its current dire financial situation due to the government’s nuclear phase-out policy. (Doosan also builds nuclear power plants).

“If the company goes bankrupt, the administration fears that it – and not management’s inability to read energy trends – will be blamed for the job losses,” Youn said. “Especially with the general election on April 15 and the economic crisis that followed the corona epidemic, this is a politically sensitive time.”

Youn said it seemed unlikely that Doosan would abandon its coal-related business anytime soon. He said the company reiterated at a shareholder meeting on March 30 that it plans to earn as much income from its existing core business, coal-fired power, before expanding into new businesses. .

“So at this point, Doosan Heavy doesn’t appear to have a plan to reduce its coal business,” Youn said. “Banks are talking about selling Doosan Heavy’s subsidiaries but not much of its coal business, which is the main reason for Doosan Heavy’s financial problems.”

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