Dutch pension fund urges Seoul to scrap domestic coal power projects

Amsterdam-based APG Asset Management, a subsidiary of Dutch pension fund administrator APG, warned in a letter to the South Korean government that its failure to scrap a plan to build coal-fired power plants here will constitute a “significant risk factor” to its investment in Korea.

The letter, disclosed by Seoul-based nonprofit Solutions for Our Climate Wednesday, involves three plants with a combined power capacity of 6.3 gigawatts under construction in Gangwon Province.

The private-run power stations will pose a latent threat to the nation’s industries in the near future amid its endeavor to achieve carbon neutrality, Park Yoo-kyung, head of responsible investment & governance, Asia Pacific, at APG Asset Management, wrote in the letter to a presidential panel sent Tuesday.

“In the face of the climate crisis, coal-fired power plants will inevitably plague the Korean economy and the future of mankind,” read the letter written in Korean. “Korea’s greenhouse gas emissions will pose a significant burden on not only the private-sector participants but also other domestic businesses in the export-driven country.”

Failure to the coal phaseout will incur a substantial cost of offsetting carbon emissions and operational losses starting no later than 2030, Park added.

The letter was sent to co-chairpersons of the Commission on 2050 Carbon Neutrality -- Prime Minister Kim Boo-kyum and Yun Sun-jin, professor of the Graduate School of Environmental Studies at Seoul National University.

The sustainability specialist went on to say that the risk of continuing to increase carbon footprint far outweighed the consequences of pulling out of ongoing coal project contracts.

“We see that private-sector entities are forced to push through the project in consideration of various obligations, financial pressure from a failure to meet them, as well as progress payments and sunk costs, setting aside the profitability of the projects themselves,“ Park wrote.

“We dearly urge (the body) to salvage the ensnared private-sector entities as soon as possible by setting up a strong and clear-cut policy direction.”

This is in line with APG Asset’s sustainable goals for its pension fund clients, including Dutch civil service pension fund ABP, as part of its climate neutral portfolio in the making.

APG in February sold off its entire stake in state-owned power generator and distributor Korea Electric Power Corp. in February. It was disappointed that the minority shareholder’s objection to Kepco’s coal-fired power plant construction in Indonesia and Vietnam bore little fruit.

APG also sold eight companies globally that have more than a combined 90 gigawatts of coal-fired capacity in 2020.

Korea is poised to complete three coal-powered thermal plants in Goseong County, Gangneung City and Samcheok City over the next few years, all in Gangwon Province.

A 2.08-gigawatt project in Goseong, undertaken by SK Gas, SK Ecoplant and Kepco’s subsidiary, is expected to become full-fledged by October. Another 2.08-gigawatt project in Gangneung, led by Samsung Engineering & Construction and a Kepco subsidiary, is poised to set sail in March 2023.

However, the Samcheok project, proclaimed to be Korea’s final coal power plant with 2.1 gigawatt capacity, has been suspended since October 2020. Posco Energy, Posco Engineering & Construction and Doosan Heavy Industries & Construction are taking part in the now-stalled project.

By Son Ji-hyoung (consnow@heraldcorp.com)