Embarrassment for Japan as Indonesia court rejects coal plant’s permit

In an embarrassing rebuff to the Japan Bank for International Cooperation (JBIC) an Indonesian administrative court has ruled a key environmental permit for a huge coal plant expansion was issued illegally.

Just hours before the West Java civil court revoked the environmental permit for the 1000 megawatt (MW) Cirebon 2 Coal Fired Power Plant, the financial press reported a coalition of banks led by JBIC had signed a loan agreement to provide US$1.74 billion for the controversial project.

Other banks involved in the funding consortium for the project are Korea Eximbank and Nippon Export and Investment Insurance. According to Market Forces, a divestment advocacy group, private banks which agreed to provide US$960 million in finance for the project are ING Bank Mitsubishi UFJ Financial Group, Mizuho Bank and Sumitomo Mitsui Banking Corporation.

The lead arrange of finance for the project is the global Dutch bank ING, which rejected pressure to withdraw from its role despite adopting a policy in November 2015 that it would reduce its exposure to coal projects.

The legal challenge to the project was filed in December 2016 by The People for Environmental Protection (RAPEL) with legal representation by the Advocacy Team for Climate Justice.

At the heart of the legal challenge was RAPEL’s claim that local planning law only permitted power plant development in the district of Astanajapura. However, the Cirebon 2 expansion to the existing power station also extended into Mundu district, which was zoned for local livelihoods.

The provincial government which issued the permit has 14 days to appeal the decision.

However, other parts of the local community’s case – including that the environmental assessment for the project failed to assess basic health and environmental impacts of the expansion – has yet to be ruled on.

Since the existing Cirebon power station was commissioned in 2012 local residents have complained about the impact of pollution on the health of residents and the shellfish they harvest. Local small scale fishing industry operators and salt producers fear the expansion of the plant will further damage their ability to make a living.

The existing project was financed with a US$595 million loan from a consortium of banks including JBIC and the Export-Import Bank of Korea (Kexim).

Japanese and Korean government-backed banks are involved in the project as a way of subsidising the operations of major joint venture partners from their respective countries which own the bulk of the consortium developing the power project.

Cirebon Energi Prasarana (CEPR) is a joint venture dominated by four Japanese and Korean companies: Japan-owned Marubeni Corporation (35 per cent), Korea Midland Power Co (10 per cent), South Korean company Samtan Co Ltd (20 per cent) and Chubu Electric (10 per cent). The Indonesian company PT Indika Energy, a subsidiary of the Indika Group, owns 25 per cent of CEPR.

WALHI/Friends of the Earth Indonesia has called on JBIC to abandon the project and for CEPR to end all construction activities on the site.

“JBIC and the consortium has signed a loan agreement despite their full knowledge that a civil case to halt the plant’s development was underway. We have sent JBIC a letter informing them of the court case,” Wahyu Widianto, campaign manager of WALHI West Java, stated in a media release.

Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) His Twitter feed is here.