Samsung C&T, KEPCO urged to pull out of coal power plant project in Vietnam

The Vung Ang 1 thermal power plant in Ha Tinh, Vietnam. Courtesy of nocoaljapan.org

By Ko Dong-hwan

Global asset managers have urged companies building a coal-fired power plant in Vietnam to withdraw due to climate change risks and economic inefficiency, according to a letter from one of them.

Nordea Asset Management, which describes itself as "the largest asset manager in the Nordic region," said it had joined 17 other asset managers in "emphasizing the critical role that listed companies (related to the plant construction) play in addressing climate change, as well as the risk faced by companies that fail to fully address their own specific climate risk exposure."

"We see it as imperative that companies actively address climate-related issues in a structured and transparent manner, and it is our strong conviction that this contributes to improved risk management and presents companies with better business opportunities," the letter said.

The asset managers, including 13 firms that agreed to reveal themselves ― among them AP7, Brunel Pension Partnership, CCLA and Folksam ― have combined assets of 3 trillion euros ($3.5 trillion), according to Climate Media Hub, which obtained the letter and shared it with The Korea Times.

Climate Media Hub said the asset managers had targeted 12 companies, including Samsung C&T and Korea Electric Power Corporation (KEPCO), that are building the 1,200-megawatt (MW) Vung Ang 2 power plant in Ha Tinh Province. Yonhap said Tuesday Samsung is the engineering, procurement and construction (EPC) contractor while KEPCO leads South Korean firms' overall bid in the project.

Nordea said the project will "suffer from high climate-related, financial and reputational risks." It urged the companies to "make public commitments to end all involvement in new coal power projects worldwide, without exception, across all of your operations."

Nordea said the project is "inconsistent" with the goals and timelines of the Paris Agreement and the U.N. Sustainable Development Goals. The aim of the international accord from 2015 is to keep the global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to try to limit the increase to 1.5 degrees.

In this Oct. 7 file photo, activists criticize South Korean power distributor KEPCO in Seoul's Seocho District over its participation in constructing the Vung Ang 2 coal-fired power plant in Vietnam. Yonhap

Nordea also said the project's economic viability is uncertain. It referred to a 2019 report by the U.K. think tank Carbon Tracker that concluded the cost of constructing renewable resources-based power plants would be "lower than the operation costs of existing coal-fired power generation in Vietnam by as early as 2022."

Nordea said that according to an independent analysis by the Environmental Law Alliance Worldwide, a 2018 environmental impact assessment of the project did not satisfy internationally accepted standards, which led to the passing of "weaker emission standards."

"If you decide to participate in this project, we would like you to prepare a statement to your shareholders addressing the associated climate-related, financial and reputational risks and how these risks align with your climate strategy," Nordea said in the letter.

Youn Se-jong, from South Korean non-profit organization Solutions for Our Climate, told The Korea Times this is the first time global asset managers had singled out a project and asked participating companies to pull out from financing it or providing services.

"This, in other words, indicates that the Vung Ang 2 project's feasibility has raised serious doubts and concerns worldwide," Youn said. "Many share investors and financial investors have already stepped back from the project. Since even the institutionalized investors (the 18 asset managers) have come forward expressing concerns on the project, those investors still in the project will have to seriously consider whether to remain in it."

Youn also said previous coal-fired power plant projects in Vietnam had moved to using natural gas and Vung Ang 2 "must also consider that option."

According to Yonhap, South Korea's Doosan Heavy Industries and Construction announced its participation in the project on Oct. 20 by signing a 900 billion won ($794 million) contract with Vietnam's VAPCO.

With the contract ― valid from 2021 to 2025 ― Doosan reportedly will be another EPC contractor alongside Samsung C&T, supplying materials including boilers and other auxiliary balance-of-plant materials.

KEPCO and Japan's Mitsubishi each have a 40 percent share in the project worth $2.2 billion, Yonhap said.

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