Despite their emphasis on sustainable finance, the Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) have been increasing their financial support for coal-based power generation.
According to data from the National Assembly Budget Office (NABO), Monday, the annual loan volumes dedicated to coal-fired power plant projects by these policy financial institutions have consistently been on the rise.
KDB's loan commitments related to coal amounted to 1.4 trillion won ($1.05 billion) as of 2022, marking a 15.1 percent increase compared to the previous year. This loan volume marked a significant jump from 776.3 billion won in 2019 to 1.07 trillion won in 2020 and has sustained its upward momentum since.
As a result, the share of coal power projects in KDB's total loan portfolio is also rising. The proportion was 0.4 percent in 2019, but it climbed to 0.5 percent in 2020 and reached 0.6 percent as of this July.
KDB's loan volume for this portfolio is expected to increase further, as its financial support for the Indonesian coal-fired power plant Jawa 9 and 10 is still being utilized during the construction phase. Another Indonesian plant, Kalsel, is also currently operational, having received a loan of $177 million from KDB.
Eximbank is no exception. Its loan commitment to these projects witnessed a significant increase, soaring from 2.5 trillion won in 2018 to 3.7 trillion won in 2022.
In terms of its entire loan portfolio, the percentage initially dipped from 2.4 percent in 2018 to 2.0 percent in 2019. However, this proportion made a comeback in 2020 at 2.4 percent, steadily climbing to 3 percent by this July.
Eximbank is currently backing eight coal power projects. As of the end of June, the remaining balance is $2.97 billion. Six of these projects, including Indonesia's Cirebon 1, have been completed. Construction is still underway for the Java 9 and 10 project in Indonesia and the Vung Ang 2 project in Vietnam.
NABO noted that these moves contrast starkly with both banks' earlier commitments to amplifying eco-friendly initiatives. "While advocating for eco-friendly practices, the simultaneous support for overseas coal-fired power generation calls for a reassessment of investment decisions," the report notes.
In response, Eximbank explained that it has not approved any such projects since 2021.
"The disbursement of funds for coal-fired power generation projects is typically executed in installments over the usual four- to five-year construction period for the power plants," an Eximbank official told The Korea Times. "Although we have halted support for new projects, it's inevitable to execute projects that have already been agreed upon. The repayment of the loan usually spans the operational duration of the power plant, which typically takes 15 to 20 years."
He added the outstanding balance is expected to increase until 2024 and will decrease gradually thereafter, and be completely eliminated by 2040.