THE Korean Government-controlled company behind the controversial Bylong coal mine proposal can expect “tough questions” from key Korean investors in 2019 about its $700 million Bylong investment because of the climate change risk of stranded assets, a new report has found.
While the NSW Department of Planning this week assessed the mine between Denman and Mudgee “approvable”, a report prepared by the Institute for Energy Economics and Financial Analysis (IEEFA) in September said the Korea Electric Power Company (KEPCO) can expect to face new challenges, particularly to overseas projects like the Bylong mine as the country commits to climate change action.
Report author Melissa Brown, a former securities analyst at JP Morgan and Citigroup, said 2019 “promises to be a year of heightened engagement by investors with KEPCO”, in part because of its inclusion in a list of 100 companies targeted in a global investor initiative seeking greater disclosure of climate change risks.
“KEPCO should expect tough questions about its involvement in controversial overseas projects like… its investment in the still-undeveloped but 100 per cent owned Bylong coal project in Australia,” Ms Brown concluded.
The project’s need for “meaningful additional investment” if approved by the NSW Independent Planning Commission “repeatedly raised red flags as project fundamentals come under increased scrutiny given rapid changes in coal power markets”, she found.
South Korea recently enacted a plan to more rapidly shift to renewable energy. But it was critical for the 51 per cent government-owned KEPCO and its key investors, the National Pension Service and Korea Development Bank to “play a leading role in pulling Korea’s other pensions and banks in a greener direction”, Ms Brown found.
Ms Brown said a disconnect between KEPCO’s domestic and overseas strategy development could expect greater scrutiny in 2019.
“KEPCO, like its Chinese and Japanese counterparts, continues to view overseas markets as a profit opportunity even as the economics of traditional baseload projects are eroding and political risk on the ground is rising,” Ms Brown wrote.
In its assessment of the Bylong project as “approvable” the Department of Planning did not consider the issue of climate change risk.
Korean environment group Solutions for Our Climate managing director Joojin Kim questioned KEPCO’s investment decisions because of the climate change risk, with the Bylong project a significant example.
“KEPCO’s decision to invest in coal mines is short-sighted, inconsistent with global energy market trends and the Paris Agreement, and eventually a result of poor governance,” Joojin Kim said.
In August KEPCO Bylong Australia chief operations officer Bill Vatovec opened a community information centre in Mudgee to detail its plan to mine 6.5 million tonnes of coal per year, employing up to 470 people during peak operation.
“The main reason we’ve opened this centre is to demonstrate to the community that we’re very serious in regards to engaging people in this region,” Mr Vatovec said.
A KEPCO Bylong Australia spokesperson said the company was “pleased that IEEFA has referenced data on page one of its report from the Republic of Korea’s Ministry of Trade, Industry and Energy, which acknowledges the importance of coal to South Korea’s energy mix”.
“KEPCO, as a global energy company, continues to invest in research and development into renewables, non-fossil energy resources and nuclear power. As the world transitions to a reduced carbon energy supply KEPCO will continue to innovate and transform.”
The Bylong project was “necessary to help secure Korea’s energy needs for the next 25 years by securing a reliable supply of high energy coal with low ash content”, the spokesperson said.
“The coal from the Bylong coal project has a low sulphur content (less than 0.4 per cent) that has advantages for lowering air pollution in South Korea and accords with South Korea’s new regulations for the sulphur content of coal.”