Stop Japanese Coal Finance !

Trading house

Japan is still involved in the planning and construction of new coal-fired power plants at home and overseas. These projects are driven not only by electric power utilities such as TEPCO, Chubu Electric Power and J-POWER, but also by heavy electrical machinery manufacturers such as Hitachi, Toshiba and Mitsubishi Heavy Industries, as well as major trading houses such as Marubeni, Mitsubishi Corporation, Sumitomo Corporation, and ITOCHU Corporation. Developing new coal-fired power plants clearly goes against the global push to “decarbonize” and achieve the goals of the Paris Agreement. Such Japanese activities are being watched with scrutiny by the international community. Here, we focus on Japanese general trading houses and their coal-related business around the world.

Marubeni

Marubeni, one of Japan’s leading general trading houses, is involved in various coal-related businesses including mining, infrastructure development, and the construction and operation of coal-fired power plants around the world. The scale of Marubeni’s coal-related business stands out among Japanese trading houses. German NGO Urgewald ranked Marubeni the 69th largest company on its 2019 Global Coal Exit List.

*Global Coal Exit List:: A comprehensive database (list) of companies involved in the global coal business. International institutional investors refer to this database when making decisions to divest from coal (withdraw investment from companies or financial institutions involved in coal-related business). Please see which Japanese companies are listed.

https://coalexit.org/

Marubeni is constructing coal-fired power plants around the world

Marubeni operates a 100-GW business in engineering, procurement, and construction of energy infrastructure around the world. Coal-fired power plants account for 40 GW of this amount. Marubeni is also involved in many independent power producer (IPP) projects and is building new coal-fired power plants in nine countries.

Problems with Marubeni’s coal projects

Marubeni’s coal-fired power plant projects pose various problems, including significant impacts on local environments and local communities. A few have been delayed due to strong opposition from local residents. Some project plans have been or are being fought over in courts. Now,some European and American banks are proceeding moving to divest from Marubeni. Please see the factsheet for more information on each project.

Country name Location Project name Capacity Status Plan to operate
1 Indonesia West Java Cirebon 1 660MW Operation 2012
2 Indonesia Cirebon 2 1000MW Under construction 2022
3 South Africa Limpopo province Thabametsi 630MW Planning 2021
4 Botswana Palapye area Morupule B 300MW Canceled (2020)
5 Viet Nam Thanh Hóa Province Nghi Son 2* 600MW, 2 units Under construction 2022
6 Japan Akita** Akita-port 1&2 1300MW Planning 2024

Supplement:

  • * Construction of Nghi Son 2 in Vietnam has already started, but its schedule for operation commencement has been delayed.
  • ** In August 2019, project developers announced postponement of the construction start date for the Akita Port Thermal Power Plant (tentative name)

Reference

Summary sheet: “Why Marubeni: Why and how investors should divest from and/or exclude Marubeni”
Fact sheets: 1. Cirebon (Indonesia), 2. Pagbilao (Philippines), 3. Thabametsi (South Africa), 4. Morupule B (Botswana), 5. Nghi Son 2 (Vietnam), 6. Akita Port (Japan)

Marubeni’s coal policy

Document Sustainable Development Report 2019
Summary of Marubeni’s coal policy
  • As a general principle, Marubeni will no longer enter into any new coal-fired power generation business. However, Marubeni might consider pursuing projects that adopt BAT (“Best Available Technology”, which at present is USC: Ultra-supercritical steam generating technology) and are compliant with the policies and measures of the Japanese government and any country in which the project will be executed.
  • By 2030, Marubeni will cut its FY2018 coal-fired power net generation capacity of approximately 3 GW in half.

On September 18, 2018, Marubeni announced new policies regarding its coal-fired power generation and renewable energy businesses. The company said it would no longer build “new” coal-fired power plants, would reduce greenhouse gas emissions from its power generation portfolio, and by 2030 would halve its coal-fired net generation capacity of approximately 3 GW in FY2018. Unfortunately, closer examination shows that Marubeni has no intention to stop or cancel planned or current projects. That means the reduction schedule is not proactive but rather simply depends on attrition, waiting for existing contracts to end. What this means is that Marubeni’s policies are significantly out of step with the targets of the Paris Agreement. One year since the announcement of this new coal policy, on September 18, 2019, Marubeni’s projects under planning and construction remain ongoing. It is unclear how Marubeni will go about halving the 3 GW or so of its net power generation capacity by 2030.
Marubeni has been engaged in renewable energy projects such as solar and offshore wind power generation. Nonetheless, if it does not promptly withdraw from coal-fired power generation and coal-related business, its risk of being divested by banks and investors will likely increase.

Published Documents
From Japanese NGOs
  • Japanese trading houses and the coal exit: Comments on Marubeni coal policy update (Link) 2019/10/12
  • Open Letter to Marubeni Corporation: Fix your loophole-filled new decarbonization policies (PDF) 2018/12/13
  • Marubeni’s Announcement on Pulling Out of Coal-Power: A Significant Step Forward, but Need to Close Loopholes to Meet Paris Goal (PDF)  2018/9/18
  • Press Release: Groups call for divestment from Marubeni Corporation, a major global supporter of coal-fired power plant construction (PDF) 2018/7/31
From International NGOs
  • Rapel(Rakyat Penyelamat Lingkungan: People Environment Safer)sent letter (PDF)
  • 350.org (Africa) submitted the letter to Marubeni to request an update or a summarised report on the current status of the proposed Thabametsi coal fired-power station on April 11, 2019.(PDF)
  • Rapel (Rakyat Penyelamat Lingkungan: People Environment Safer) Cirebon and WALHI West Java submitted the statement of claim to stop the Cirebon Coal-fired Power Plant Project in Indonesia, on March 26, 2019. “Re: Ongoing Serious Impact on the Community and Our Continuous Demand to Stop the Cirebon Coal-fired Power Plant Project – Unit 1 and Unit 2 in West Java, Indonesia” (Original had signed by the leaders of Rapel Cirebon and the director of WALHI West Java.)(PDF)

Following lists are Marubeni related documents and papers issued by international organizations.

  • Press Release: IEEFA Japan, Marubeni’s coal exit announcement a good first step but increased commitment needed (March 12, 2019)
    (IEEFA Briefing Note) Briefing Note: Marubeni Update Continuing Coal-fired Power Risks
  • Press Release:  New IEEFA Report  Coal-exposed Marubeni must embrace global renewable shift, July 2018.
    (IEEFA Report) Marubeni’s Coal Problem A Japanese Multinational’s Power Business Is at Risk
  • Urgewald report: The 2018 Coal Plant Pipeline –  A Global Tour (PDF), October 2018

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Mitsubishi Corporation

Mitsubishi Corporation (MC) revised its ESG Data Book 2018 in October 2019 and announced that it would not develop new coal-fired power generation in principle. In addition, in the 2019 edition, MC stated that it “has adopted a policy not to enter into any new coal-fired power generation businesses, with the exception of projects which MC has already commenced development. Going forward, paying attention to factors including future technology trends for reducing CO2 emissions (such as CCS), which will become necessary for promoting businesses while considering the environment, as well as progress towards achieving the energy mix of 2030 (including policy trends), MC will aim to reduce its coal-fired power generation capacity on a net equity basis based on 2°C scenario analyses.” However, the note of “exception of projects which MC has already commenced development” is a big loophole and does not meet the company’s aim to “reduce its coal-fired power generation capacity on a net equity basis based on 2°C scenario analysis.” Thus, under this policy MC is excluding and continuing four projects: Vung Ang 2 and Vinh Tan 3 in Vietnam, and Nakoso and Hirono in Japan.

Mitsubishi Corporation’s coal policy

Document ESG Data Book 2019
Summary of MC’s coal policy
  • MC will not be entering into any new coal-fired power generation businesses, with the exception of projects which MC has already commenced development.
  • MC will aim to reduce its coal-fired power generation capacity on a net equity basis based on 2℃ scenario analysis and paying attention to technology trends.
  • For the trading of components, use the best available technology (BAT) to the extent possible.
4 Projects Mitsubishi Corporation is involved
Country Plant name Capacity Estimated MC’s equity capacity Plan to operate
1 Viet Nam Vung Ang 2 600MW×2units 480MW 2024
2 Viet Nam Vinh Tan 3 660MW× 3 units 388MW 2024
3 Japan Nakoso IGCC Power 543MW 217MW 2020
4 Japan Hirono IGCC Power 543MW 217MW 2021

Projects in Vietnam that deserve attention

In Vietnam, MC is involved as a business operator in two coal-fired power plants in the planning stage, namely, Vung Ang 2 (Hà Tĩnh province) and Vinh Tan 3 (Bình Thuận province). Hong Kong-based power company CLP Holdings, which was initially a joint venture with MC, announced withdrawal from new coal businesses in December 2019. Thus, investment in Vung Ang 2 is currently covered by MC (40%) and Chugoku Electric Power Co. (20%); Korea Electric Power Corporation (KEPCO) is considering acquiring, and the rest (40%) that CLP held. Meanwhile, among the banks that were considering lending to this project, Standard Chartered Bank (UK), DBS and OCBC (Singapore) decided to withdraw due to their decoalization (coal exit) policies. This is one example showing how coal exit and decarbonization trends around the world are now occurring at the project level.

Vietnam is one of the most vulnerable countries to climate change. Because of economic development and rapid industrialization in recent years,it is also experiencing increased environmental pollution, especially air pollution.

It is also important to note that coal-fired power plants are losing their dominance because of sharply declining renewable energy costs worldwide. Carbon Tracker, a financial think tank based in the UK,projects that building new solar power plants will be cheaper than operating existing coal-fired power plants in Vietnam as soon as 2022. It says that not only investments in new coal-fired power plants, but also the economic viability of existing coal-fired power plants should be questioned. Under the Paris Agreement, developing countries including VietNam have committed to making efforts to reduce greenhouse gas emissions. If coal-fired power plants currently being planned are built and start operating, a huge amount of CO2 emissions will be “locked in” for the next several decades, impacting the climate change measures contributions of developing countries.

In such circumstances, MC is going against the coal exit movement by continuing to develop new coal-fired power plant projects. These projects only worsen environmental pollution and damage the health of local residents.
They also impose economic risks on Vietnam as well as risks from failing to meet its climate contribution commitments.

Projects in Fukushima

On August 2, 2016, MC established two new companies, Hirono IGCC Power GK and Nakoso IGCC Power GK, and is moving forward on two large demonstration projects for Integrated coal Gasification Combined Cycle (IGCC) power plants in Fukushima. Construction is already underway and Nakoso is slated to start operating on in 2020 and Hirono in 2021 (Nakoso is already under trial operation).

Project proponents call IGCC a “next-generation clean coal technology with improved generation efficiency and environmental performance,” but despite its “high efficiency” claim, IGCC power plants still emit about twice as much CO2 as LNG thermal plants. It is far-fetched to say that IGCC is a “clean” technology when the amount of pollutants it emits is so high. Furthermore, the construction cost of IGCC is said to be about 20% higher than that of conventional coal-fired power plants, indicating that IGCC is not economically competitive either.

Reference

Kiko Network Paper
Universal failure: How IGCC coal plants waste money and emissions

Coal hiding behind “cogeneration”

According to ESG Data Book 2019, MC states a combined 669 MW of capacity (equity capacity as of the end of September 2019) in its domestic and overseas coal-fired power plants business. However, it also includes three coal-fired thermal power projects in its cogeneration business, which it describes as “decarbonized/low-carbon energy.” These should be listed in the coal-fired power plant business and included as part of its equity capacity. MC should also consider a detailed coal equity reduction plan that includes these cogeneration projects and is truly aimed at decarbonization.

Cogeneration Businesses

Country Plant name Net equity basis (Net) Fuel
Japan MC Shiohama Energy Services 98 MW Gas, Coal
Japan MCM Energy Services 52 MW Coal, Biomass mixed combustion
Japan Mizushima Energy Center 56 MW Coal
Total 206 MW
Reference:

SUMMARY SHEET ”Why investors should divest from Mitsubishi Corporation”(PDF)

Released Information
From Japanese NGO:
  • NGO Joint Statement on Mitsubishi Corporation’s Coal-fired Power Generation Policy(2019/10/21 )
  • [Press Release] NGOs urge 51 investors to divest from Mitsubishi Corporation which promotes coal-fired power generation(2020/03/23)

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Sumitomo Corporation

In August 2019, Sumitomo Corporation (Sumitomo) released Integrated Report 2019. In this report, Sumitomo announced that it “will not have new development in the coal-fired power generation business” and for thermal coal, it will “desist from new mine development projects.” However, this policy has loopholes just like other trading houses. Some exceptions are set and Sumitomo keeps pursuing projects that are under construction or in the planning stage.

Sumitomo Corporation’s coal policy

Document Integrated Report 2019
Summary of Sumitomo’s coal policy
  • It will not have new development in the coal-fired power generation business. However, it will make a decision individually about new development in cases where the project is essential to the economic and industrial development of the local community and where the project is complying with the policies of the Japanese and host
    country governments based on the international initiatives to mitigate climate change issues.
  • By the target year of 2035, it aims to shift the composition of the portfolio in terms of net ownership generation capacity as follows: coal from 50% to 30% etc.

Sumitomo mentioned it aims to shift the composition of its portfolio in terms of net ownership generation capacity of coal from 50% to 30%, of gas from 30% to 40%, and of renewables from 20% to 30% by the target year of 2035. Also, it says it will not have new development in the coal-fired power plant business. However, this policy has exceptions as it says “we make a decision individually about new development in cases where the project is essential to the economic and industrial development of the local community and where the project is complying with the policies of the Japanese and host country governments based on the international initiatives to mitigate climate change issues.” Sumitomo considers the Van Phong project in Vietnam to fall under this exception and is proceeding with its construction.

Country Plant name Capacity Estimated Sumitomo’s equity capacity Plan to operate
1 Indonesia Tanjung Jati B (Unit 5 & 6)  1,000MW×

2 units

2021(Start in March 2017)
2 Viet Nam Van Phong 1 660MW×

2 units

2023(Start in August 2019)

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