World Bank energizes South Africa

US $3.75 billion to fund power plants

Published: Saturday 15 May 2010

the World Bank has approved a loan of US $3.75 billion for a coal-fired power plant in South Africa’s Limpopo district. The loan for the Medupi power plant with 4,800 MW capacity was approved during the bank’s board meeting on April 8 though many member countries including the United States, Britain and the Netherlands abstained from voting. They were against funding a power plant that would emit greenhouse gases.

The World Bank defended its decision. The project is about giving the poor access to energy and catalyzing growth in South Africa and the wider sub-region, said the bank’s vice president for African region, K Ezekwesili.

Civil society groups in the West had been campaigning against loan approval for the plant in the run up to the voting. They said loan support to “dirty technology” would have severe climate change repercussions. There has also been a sustained pressure on the World Bank not to fund coal-fired power plants and the bank is currently reviewing its policy on it.

“Fostering development and eradicating poverty in the developing world remains the core mandate of the bank. A blanket decision by the bank to stop funding coal plants in the developing world, without assessing resource endowments of the host nation and the incremental economic and financial costs that such a decision would impose on the host nation, is clearly not pro-development,” said Surya P Sethi, former principal advisor (energy), Planning Commission of India. “A decision to blanket ban would be all the more unfortunate when one realises that many oecd countries endowed with coal reserves continue to build coal-fired power plants despite their advanced level of development and their historical responsibility for the current global greenhouse gas concentrations. The only way the Bank Group can justify such a ban is by providing the full incremental life time costs of the alternative path, proposed by the bank, as a grant to the host nation,” Sethi added.

South Africa’s state-owned enterprise, Eskom, will construct the Medupi plant. The company’s finance director Paul O’Flaherty said the World Bank loan is a multi-year investment programme. He said US $3.05 billion would be used for the Medupi project. The rest would be spent on a 100 MW wind power project and a 100 MW solar power project. Some of the funds (US $ 485 million) would be spent on low carbon efficiency components that include a railway project to transport coal.

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