Environmental groups are seeking an injunction against a move by South Korea to bail out a builder of coal-fired power plants, saying the rescue package goes against the country’s climate and public health commitments.
Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM) on March 26 issued a 1 trillion won ($825 million) emergency loan to Doosan Heavy Industries & Construction Co. The bailout is listed as part of the South Korean government’s stimulus package for businesses impacted by the Covid-19 pandemic.
But the decision has come under fire from environmental watchdogs, given that most of Doosan’s revenue comes from building coal-fired power plants.
“These decisions to support Doosan Heavy come with significant environmental and health consequences,” the environmental groups from South Korea, Indonesia and other countries wrote in a joint letter submitted April 8 to the South Korean Ministry of Economy and Finance.
They said Doosan’s financial woes were not directly caused by the Covid-19 pandemic. They noted that, between 2010 and 2019, Doosan’s credit rating dropped from A+ to BBB and its share price declined by 93 per cent — “well before Covid-19 was an apparent crisis,” they wrote.
“While Covid-19 is certainly a pandemic, the situation should not be capitalised on by Korean companies to aggravate the climate crisis and air pollution — which are equally deadly threats to humanity and our economy,” the groups wrote.
Eighty per cent of Doosan’s revenue comes from coal power plants at home and abroad, including two projects on Indonesia’s Java Island, the groups said. South Korean-financed overseas coal power projects employ the country’s advanced technology, but are still several times more polluting than those in South Korea, as they take advantage of laxer environmental regulations in South and Southeast Asian countries to trim construction and operating costs, the groups said.
South Korean public financial agencies such as KDB, KEXIM and the Korea Trade Insurance Corporation (K-Sure) are already responsible for funding coal plants that are estimated to cause up to 151,000 premature deaths in countries such as Indonesia, Bangladesh and Vietnam, according to a Greenpeace report published last year.
Sejong Youn, a lawyer and director of the South Korean NGO Solutions for Our Climate, one of the groups filing the injunction, said the government should have stricter control over Doosan’s restructuring if the bailout goes through.
The groups are calling on the government to refrain from providing the company with additional funding, but only provide financial support under the strict condition that the firm uses such support to restructure its business away from coal power and toward renewable energy technologies.
“Without a concrete plan, there is a huge risk that the public fund will simply be wasted on paying off debt that Doosan Heavy accrued through its bad business decisions,” Youn wrote in an email to Mongabay.
He added the bailout decision was linked to the fact that Doosan is a large corporation that accounts for a significant portion of the economy in the “heavy industry belt” in the southeastern region of South Korea, employing about 6,700 people. Youn said the administration faces political pressure in this situation because there’s a perception that Doosan is in its current dire financial situation as a result of the government’s nuclear phaseout policy. (Doosan also builds nuclear plants).
Without a concrete plan, there is a huge risk that the public fund will simply be wasted on paying off debt that Doosan Heavy accrued through its bad business decisions.
Sejong Youn, director, Solutions for Our Climate
“If the company goes under, the administration fears it — not the management’s failure to read energy trends — will get the blame for job losses,” Youn said. “Especially with the general elections coming up on April 15, and the economic crisis that came with the corona outbreak, it is a politically sensitive time.”
Youn said it appeared unlikely Doosan would shift away from its coal business soon. He said that the company had reiterated at a shareholder meeting on March 30 that it planned to secure as much revenue from its existing core business, i.e. coal power, before expanding to newer activities.
“So at this point, Doosan Heavy does not seem to have a plan to reduce its coal business,” Youn said. “The banks are talking about selling Doosan Heavy’s subsidiaries but not much about its coal business, which is the core reason for Doosan Heavy’s financial troubles.”
This story was published with permission from Mongabay.com.
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