China’s ICBC under pressure to withdraw funding from Zimbabwe’s 2,800MW coal power plant

The Industrial and Commercial Bank of China (ICBC), the world’s largest bank by assets, has come under pressure to withdraw funding from Zimbabwe’s planned 2,800MW coal-fired power plant at Sengwa.

This leaves what is potentially the country’s largest energy investment in doubt.

Zimbabwe country holds estimated coal reserves of 12 billion tonnes, according to data from the Ministry of Mines, and is escalating its search for investment to exploit it.

But environmental activist groups that have been lobbying ICBC to cancel the project funding claim the bank has committed not to fund the project.

“ICBC also confirmed that they will not fund the Lamu Coal Project in Kenya as well as the Sengwa Coal Project in Zimbabwe,” according to Go Clean ICBC, part of a coalition of 32 climate activist groups.

There was no comment from RioZim or ICBC. The bank is the world’s biggest lender, with assets of US$4.9 billion last year.

Rio Energy, a unit of RioZim, last year announced it had reached an agreement with China Gezhouba Group Corporation (CGGC) to build the long-delayed power plant for US$3 billion. CGCC, a subsidiary of the China Energy Engineering Corporation, one of the world’s largest construction firms, was to help raise funding for the project.

However, RioZim would now have to seek alternative funding if ICBC confirms it is pulling out.

Coal: under pressure

Earlier this month, Go Clean said it had met ICBC and convinced the bank to withdraw its funding to projects in Africa.

“There have been some major campaign developments regarding our engagement with the Industrial and Commercial Bank of China (ICBC). These developments include the Bank’s continued dialogue with the Go Clean ICBC coalition to chart a clear road map for ICBC to stop funding coal,” Go Green said in a statement.

Zimbabwean rights groups, such as the Centre for Natural Resource Governance, also campaigned against the Sengwa project, saying it goes against Zimbabwe’s commitment to cutting carbon emissions.

Zimbabwe currently generates about 1,200MW from its old power plants, less than its peak demand of about 1,400MW.

Zimbabwe Energy Regulatory Authority hopes the country will generate 1,100MW from non-hydro renewable energy sources by 2025, and the government floated tenders for 500MW of solar projects last year.  This year, Zimbabwe plans to add 100MW of solar energy from ongoing projects, Cabinet said on Tuesday.

However, Zimbabwe is still keen on using its coal resources.

The Sengwa area alone has proven coal reserves of 1.3 billion tonnes, and RioZim has previously said there is enough coal there to support a 10,000MW plant. But these resources remained unexploited over the years as Zimbabwe struggled to attract investment. However, in 2018, RioZim finally started receiving letters of interest from potential investors.

Banks going green

Many large funders have cut back on lending into fossils, such as coal and oil.

In May, the Asian Development Bank (ADB), a key investor in energy, announced it was cutting back on fossils. Last year, the UK announced that it would no longer fund coal, although British investment in projects such as Mozambique’s vast energy fields would continue.

Large international banks, among them Standard Chartered, BNP Paribas and Nedbank, have halted support for new coal mines.

Chinese banks – led by ICBC, Bank of China and China Construction Bank and Agricultural Bank of China – have led in coal investments. Between 2016 and 2019 these four banks alone sank US$35 billion into mining and US$70 billion into coal.

But Chinese banks may be having a rethink.

Speaking at the International Financial Forum Spring Meeting in Beijing in May, ICBC chief economist Zhou Yueqiu said the bank will “establish a road map and timeline for the gradual withdrawal of coal financing”.

This will limit the sources of capital that any current or future Zimbabwean government will have to invest in thermal power.

While calls are growing for the adoption of cleaner solar, many developing countries, Zimbabwe included, argue that they still need coal to grow their economies. They say they cannot afford a fast and affordable complete switch to renewables.

Germany, Europe’s biggest economy, announced last year that its roadmap to ditching coal would take 18 years and cost over US$44.5 billion.

Sticking to coal

While Zimbabwe has granted incentives to push green energy, its best chance for electricity near-term self-sufficiency still lies in the coalfields.

In Hwange, nearly 1,000MW in new generation capacity is at various stages of development.

Local demand for coal will rise when two new power units at Hwange, being constructed by China’s Sinohydro, are completed next year. The new units will produce 600MW.

A new Hwange coal-fired power plant, the Zimbabwe Zhongxin Electrical Energy Limited (ZZEE), will start produce 50MW by October. It targets to ultimately produce 320MW.

Contango Holdings, a UK-listed investment firm, last year bought into the Lubu coal project near Hwange. Estimates there are of a “sizable resource” of 1.3 billion tonnes of coal, according to the company.

Apart from Hwange Colliery, other coal investors in the area include Makomo Resources, which is currently on an expansion plant, as well as Chilota Coal and Western Coal.

Chilota is investing an initial US$12 million on an open pit operation and targets to hit 100 000 tonnes of coal.

At Western Coal, whose special grant is held by businessman Billy Rautenbach, the company plans to invest at least US$20 million to establish an opencast mine. The mine would operate for six years before the company goes underground.