DBS and OCBC among lenders of $2.45 billion for Vietnam coal power plant

ATMs of OCBC, DBS and other banks located at the passenger departure hall of Changi Airport Terminal 3 in 2016.
ATMs of OCBC, DBS and other banks located at the passenger departure hall of Changi Airport Terminal 3 in 2016.PHOTO: ST FILE

SINGAPORE - DBS and OCBC are among a group of banks and lending agencies that have signed off on financing of about US$1.87 billion (S$2.45 billion) for a controversial coal-fired power station in Vietnam.

The 1,200MW Nghi Son 2 power station in Tinh Gia district, Thanh Hoa province, is one of a number of large coal-fired power plants planned to meet Vietnam's energy needs.

But green groups, the International Energy Agency and the World Bank fear such big coal projects will exacerbate climate change by locking in years of polluting emissions. Burning coal is a major source of local air pollution and carbon emissions blamed for heating up the planet.

Environmental groups have put pressure on DBS, OCBC and UOB as they are major funders of coal projects in the region. The groups also say regional governments should focus investments on increasingly cheaper renewable energy.

The Singapore banks, however, say coal financing is meeting an investment need. They believe that a rapid switch to renewable energy is not feasible for now, though they also say they aim to progressively encourage customers to take a greener path.

For the power station in Vietnam, Japan's Marubeni and Korea Electric Power secured the US$1.87 billion from the financing consortium, according to Thomson Reuters Project Finance International.

The loan was signed last Friday (April 13) with export credit agencies Japan Bank for International Cooperation (JBIC) and Export-Import Bank of Korea (Kexim); Japanese banks Sumitomo Mitsui Banking Corp, MUFG, Mizuho and Shinsei Bank; DBS and OCBC; and Maybank of Malaysia.

UOB is not a party to the project. Standard Chartered, which considered being part of the consortium, told The Straits Times in an e-mail on Tuesday: "Standard Chartered is not a lender of the Nghi Son 2 project."

Green groups in Japan, South Korea and Vietnam have launched petitions to halt the project. Parliamentarians in South Korea have also questioned Kexim's participation.

Many Asean countries see coal as a way to fuel the region's rapid economic growth. But increasing fears over local air pollution have triggered protests and concerns that the region will not meet its greenhouse gas commitments under the 2015 Paris Climate Agreement. The pact aims to progressively cut carbon emissions to reduce the risks of more extreme weather and rising sea levels.

Indonesia, a major coal producer, also has large investment plans for coal-fired power stations.

On Monday, environmental group Greenpeace issued a report on local residents contesting plans to more than double the capacity of Celukan Bawang coal-fired power plant on Bali's north coast near the tourist area of Lovina.

According to Greenpeace, the existing 426MW plant has caused health problems, damaged crops and reduced fish stocks because of pollution and increased ship traffic bringing in the coal. Local residents fear worse impact if the planned 660MW expansion goes ahead.

"These expansion plans must not be allowed to go ahead," said Mr Dewa Putu Adnyana, director of Indonesia Legal Aid (LBH), Bali.

"We are now running a lawsuit to stop the project. There has been no public consultation about the expansion plans, which are being pushed through without many of the environmental impact assessments that the law demands."