Picture: ISTOCK
Picture: ISTOCK

Environmentalists claim a barrage of legal challenges pose a risk to new independent coal projects and may deter banks from financing them.

SA banks will not confirm whether they will or will not fund the power plants in question, Thabametsi and Khanyisa.

But on Wednesday energy analyst and MD of EE Publishers Chris Yelland reported "it has been reliably learned" that Standard Bank had advised the director-general of the department of energy, Thabane Zulu, of the bank’s new position to stop funding the construction of any new coal-fired power plants, in line with new Organisation for Economic Co-operation and Development country protocols. The department did not comment on the matter.

Standard Bank spokesperson Ross Linstrom could not comment on specific transactions due to client confidentiality protocols, but said that all transactions were in line with the company’s commitment "to balance Africa’s economic development and energy needs with climate change mitigation and adaptation".

Rand Merchant Bank, however, confirmed it was in the process of assessing the Thabametsi project "in syndication with other major banks and financial institutions in SA."

An Absa spokesperson confirmed that the bank was also a potential funder of both projects but that a decision "remains subject to further credit approvals and due diligence".

The Development Bank of Southern Africa also said it was bound by its client confidentiality agreements.

Nedbank, which is also said to be a potential funder, did not respond to questions

Thabametsi and Khanyisa form part of the government’s latest energy blueprint, the draft Integrated Resource Plan, but not because they are least-cost or additional power is needed but because they are already in the pipeline.

Their inclusion in the plan has, however, elicited outcry from anti-coal lobby groups, which are calling for all new coal mining to be scrapped as it is both costly and pollutive.

Globally there has been growing reluctance to fund coal over environmental concerns.

But in SA, independent power projects like these ought to be attractive to financiers because they are tied to long-term power purchase agreements from Eskom that are guaranteed by the government.

But through Life After Coal — a joint campaign between the Centre for Environmental Rights (CER), Earthlife Africa and groundWork — environmentalists have lobbied local banks not to fund the two coal projects.

Christine Reddell, an attorney at the CER, said the campaigners had been engaging with the banks since May 2017. While there is a reputational risk related to funding projects that contribute to climate change, the biggest risk for the banks in SA is that the two projects will be delayed or, in fact, not go ahead.

"For Thabametsi we are fighting the environmental authorisation in court, and we are fighting the atmospheric emission licence, the water-use licence and the licence from the National Energy Regulator of South Africa," said Reddell.

Similar challenges had been launched against the licensing for Khanyisa.

steynl@businesslive.co.za