KOREA
BEYOND COAL

Attempts to finance Samcheok power plant against the current of climate crisis

June 16, 2021, residents of the Samcheok Committee Against Coal Power Plant Construction and Korea Beyond Coal (KBC) held a press conference in front of NH Investment & Securities' headquarters to condemn the issuance of corporate bonds by Samcheok Blue Power Co., Ltd. This is because NH Investment & Securities said that they will solely undertake the issuance of corporate bonds of Samcheok Blue Power, which had been postponed indefinitely.

Samcheok Coal Power Plant, which is under construction by Samcheok Blue Power Co., Ltd., is the last coal power plant in Korea with a capacity of 1,050 MW per unit. Samcheok Blue Power Co., Ltd. started construction even though about 1 trillion won of the total project cost of 4.9 trillion won was not prepared and issued corporate bonds for construction costs. So far, corporate bonds have been issued three times, but construction costs of 800 billion won are still insufficient.

If the issuance of corporate bonds covers the project cost and the Samcheok coal plant is completed, the power plant will emit 390 million tons of greenhouse gas for over 30 years. That's the equivalent of the UK's annual greenhouse gas emissions, making huge efforts to reduce greenhouse gases go up in smoke. In addition, air pollutants such as fine dust, sulfur oxides, and nitrogen oxides emitted from power plants are expected to cause up to 1,081 premature deaths over 30 years.

The Samcheok project also involves significant financial risks. The construction cost was procured under the assumption that the plant will maintain the average utilization rate of 85% during the operation period, but with an increase in renewable energy generation, it is predicted that the rate will fall to 10% by 2050. Due to these concerns, all three domestic credit rating agencies recently lowered their credit rating outlook for Samcheok Blue Power Co., Ltd. from "stable" to "negative," which is expected to lead to a drop in credit ratings of Samcheok Blue Power Co., Ltd.

In fact, in a survey of Samcheok Blue Power's investment intentions conducted by KBC since December last year, 88.6% of major asset managers in Korea declared that they would not acquire corporate bonds of Samcheok Blue Power Co., Ltd. NH Investment & Securities should follow through with its commitment on coal exit and stop issuing Samcheok Coal Power bonds that bear enormous financial risks.