China’s role in Lamu coal plant
Financing of Lamu coal plant, and Lamu community’s four year struggle to reach Chinese investors
Status as of 2021:
On 16 November 2020, Save Lamu announced that ICBC has withdrawn from Lamu coal plant. The Star newspaper in Kenya confirmed with a Chinese official at the embassy that no Chinese companies are involved in the project.
For four years, Save Lamu and the affected community had made repeated attempts to reach ICBC, the Chinese bank providing the majority of financing for Lamu coal plant project, but has never received a response (to date as of April 2021).
In April 2020, as the Chinese government considered providing Covid-19 financial relief to companies, Save Lamu and Kitui anti-coal partner CHRCE joined 263 civil society organisations around the world in issuing a statement calling on these Chinese government to avoid providing bailouts harmful projects such as Lamu coal plant.
(Also, in May 2020, the $4.2b Sengwa coal project in Zimbabwe was approved with Chinese financing likely from ICBC, PowerChina, and SINOSURE, the same actors as in Lamu coal plant.)
Also for years, Save Lamu repeatedly contacted Chinese government officials to request their assistance in reaching ICBC. In 2020, Save Lamu again appealed to ICBC directly by email, while also participating in a global campaign calling on signatory banks to uphold the Principles of Responsible Banking.
In December 2019, a delegation of African youth hand-delivered a letter to the Chinese government delegation at COP25 climate talks in Madrid, Spain, on behalf of the Lamu community. The letter requested that ICBC respond to community concerns.
Prior to that, in September 2019, Save Lamu reached out to UK-based ICBC Standard Bank chief economist Jinny Yan, who said she would try to connect Save Lamu to relevant ICBC officials in Beijing, but did not respond to follow up inquiries.
In October 2019, when questioned about the project in an extended interview, Chinese Ambassador to Kenya Wu Peng deflected responsibility and expressed frustration that the media focuses on a project still under development, rather than celebrate the greener investments that Chinese actors are also making in Kenya.
In September 2020, China installed a new ambassador to Kenya, Zhou Pingjian, as well as in several other countries, shifting its ambassador from Nigeria after a four-year term.
Details of Chinese involvement
While Lamu coal plant’s developers are Kenyan companies Centum and Gulf Energy, most of the financing for Lamu coal plant will be Chinese. The Industrial and Commercial Bank of China (ICBC), the world’s largest bank, is to provide 75% of the debt financing for Lamu coal plant, and the majority of overall financing.
ICBC is private, though with government holding 34.71% shares, but two Chinese state-owned companies will serve as EPC and O&M contractors. Power Construction Corporation of China (PowerChina) and China Huadian Corporation (CHD, or Huadian) will build, engineer, procure, construct, operate, and maintain Lamu coal plant.
The Ministry of Energy and Petroleum (MoEP) requested Expressions of Interest for the project in 2013, invited tenders in early 2014, and awarded the project to Amu Power in September 2014. The winning consortium of Gulf Energy and Centum included Sichuan Electric Power Design and Consulting Company and Sichuan №3 Power Construction Company are both wholly-owned subsidiaries of PowerChina.
Lamu coal plant is predicted to cost USD $2 billion. Equity funding (25% of the total cost) is to come from Amu Power, itself a joint special purpose vehicle composed of Centum (51% of shares) and Gulf Energy (49% of shares).
Sources for the USD $500 million in equity financing are not publicly known. Reporting in 2015 and 2016 stated that Amu Power requested investment from Standard Bank, African Development Bank (AfDB), and NSSF, the National Social Security Fund. As of 2019, Standard Bank South Africa (SBSA) and AfDB have denied providing financing. (Note: SBSA’s largest single shareholder is ICBC.)
Apart from ICBC’s financing, the remaining 25% of debt financing (USD $307 million) is not publicly known. According to official project documents, it was to have been arranged by Standard Bank. In 2017 Standard Bank denied general involvement in the project but could have still previously played this role.
Industrial and Commercial Bank of China
ICBC is to provide 75% of the debt financing, between USD $1.154 and $1.2 billion.
ICBC’s financing was announced in June 2015, with the signing of an agreement for USD $900 million in export credit financing. ICBC provided its own statement, announcing the deal and envisioning that Lamu coal plant will “solve the power shortage for millions in the region.”
Since 2016, ICBC has not responded to Save Lamu’s repeated attempts to contact them.
Timeline of efforts to engage ICBC and Chinese government
From 2016 to 2019, Save Lamu contacted ICBC in formal, detailed letters, regarding community concerns about Lamu coal plant, which were also sent to relevant Chinese government offices.
- 2016 to 2018 letters from Save Lamu to ICBC (copying relevant Chinese government authorities)
- May 2019 letters from Save Lamu to ICBC and to the Chinese Embassy, requesting help in reaching ICBC
In early 2019, unable to reach ICBC, Save Lamu contacted Chinese government officials more directly, requesting their help in reaching ICBC.
In March 2019, several members of the deCOALonize coalition attended UNEA, the UN Environment Assembly, held in Nairobi. The Chinese Minister of Environment was also in attendance. deCOALonize members handed out flyers and met with representatives of the China Biodiversity Conservation and Green Development Foundation (CBCGDF) regarding ICBC’s involvement.
CBCGDF published detailed Chinese-language coverage about Lamu coal plant. Roughly translated titles: Case study of Green Belt’s “Belt and Road” ecological conflicts (EBRs):
1) Lamu, Kenya, Coal-fired Power Plant Project under “Save Lamu”
2) Environmental protection organization filed lawsuit against Kenya’s Lamu coal-fired power station project
In June 2019, Save Lamu successfully delivered their third letter to the embassy, directly following a street demonstration and attempted march, blocked by the Kenyan police, to the Chinese Embassy by deCOALonize and Greenpeace. Although the group had been forcibly stopped by police, Save Lamu members persisted for hours and compelled the embassy to receive its letter.
The (newish) ambassador promptly called for a meeting with selected activists and the media, together with potential coal plant operator and Chinese state-owned company PowerChina.
At the meeting, PowerChina and the ambassador stated that it will follow the will of the Kenyan people but made no commitments. PowerChina largely defended its involvement in Lamu coal plant.
ICBC was not involved in this meeting. Remaining consortium member CHD Power Plant Operation Company (China Huadian Corporation Ltd) remains silent. It is contracted to provide operations and maintenance for Lamu coal plant. More detailed accounts:
Chinese government position: Ambassador Wu Peng
In the 28 June meeting, Chinese ambassador Wu Peng stated, “Kenya is Kenyans’ country not the Chinese… We are guests and you (Kenyans) the host. What we can do in a sovereign state like Kenya is only under your request. What we do has to be allowed by your country, your people. [We] should not be confused for colonisers but trade partners.”
“You know the problem is who represents your people. As a country, how do we engage bilaterally? We cannot talk to each individual person. It is impossible. You have about 50 million people but you have one administration elected by your people. That is the only way as government to government,” he said.
“So please understand our position, we are not colonists like some countries did in history. We respect your country, we are allowed by your administration, if anyone goes against the set standards you can depot them. We are in agreement. In the United Nations agreement, each country is equal and whether big or small, we follow this diplomatic principle strictly.”
When asked about the project in an interview in October 2019, Ambassador Wu Peng answered that China is “ready to provide assistance in terms of building green energy facilities in Kenya. The Lamu [project] is a really interesting one. Actually, Lamu coal power plant project has never started. And been suspended for years. China company fully respect the review and the decision of the Kenya side… If you really care about it, I think you should have done better homework.” He then highlighted China’s involvement in a Garissa solar project.
When pressed, he said, “I’m wondering, why some media only pay attention to some projects that never start, like the Lamu power project, but never notice such existing and major ongoing green projects. You ask me whether we support, still support, Lamu coal power plant. Actually it’s out of the question. We, China, all indeed (?) what Kenya government like us to do, okay? We respect any review decision made by the Kenya side. Simple as that.”
