Tycoon declares coal doomed in South-east Asia in last bastion of big bank aid

[TOKYO] While South-east Asia remains one of the last places where coal power can attract international financing, one maverick tycoon thinks the region will no longer tolerate burning the dirtiest fuel.

Sarath Ratanavadi, founder of Thailand's Gulf Energy Development, is seeking to electrify swaths of the region using natural gas and renewables.

The billionaire, whose wealth has surged about 22 per cent this year, is seeking to expand his company's reach into some of the poorest parts of South-east Asia without using coal, where a need for cheap power has been expected to trump environmental protection in the pursuit of economic development.

While coal might be a traditionally cheaper source of electricity, avoiding air pollution and carbon emissions is worth the extra cost, according to Mr Sarath.

And coal will further lose its edge as it becomes harder to get public approvals and cleaner energy becomes cheaper, he added.

"Expanding power generating capacity to keep up with rising demand is not the only key question for governments in the region," he said in an interview.

"Governments and the public in many countries are willing to pay higher electricity costs from more expensive sources, such as solar and wind, rather than risking possible pollution and the public health threat" from coal.

At least 100 major lenders in the past five years have put restrictions on financing coal mines and power plants that burn the fuel, Institute for Energy Economics and Financial Analysis said in February.

But some banks are still keeping their options open for coal in South-east Asia, while others plan to withdraw only after finishing multi-billion dollar projects that will operate for decades.

While China consumes far more coal, South-east Asia and India are among the few places on the planet where demand is expected to continue rising, as the fuel has traditionally been the cheapest option to meet booming power demand from growing populations and an expanding middle class.

Oversea-Chinese Banking Corp. (OCBC) chief executive officer Samuel Tsien said last month that two Vietnamese coal plants the bank is helping finance will be its last as it shifts focus toward renewable projects.

"We have to make sure that the economic development in those countries and people's livelihood will not be impacted by the lack of funding for power projects that they need," he said. The bank is among funders for the Nghi Son 2 and Van Phong 1 coal plants.

HSBC Holdings, which last year began taking a stronger stance against financing new coal-fired plants, has left open a loophole through 2023 for projects in Bangladesh, Indonesia and Vietnam that meet certain criteria.

Those nations are exempted to "balance local humanitarian needs with the need to transition to a low carbon economy", according to the bank's policy.

That exception for the most-polluting fuel is becoming harder to support amid dire warnings that the world must abandon coal power entirely by 2050 to avoid catastrophic damage from climate change.

Those predictions are beginning to convince developers and investors to avoid coal as pressures are expected to mount against the fuel.

"The potential that coal power plants will become impaired or otherwise non-productive is rising" due to government policies and lower costs that will begin to favor renewables, as well as disruptive technologies, analysts at Moody's Investors Service wrote in a report this month.

That shift away from coal will be slower across Asia than in advanced markets such as the US and Europe because of the rapid pace of power demand growth, they wrote.

Gulf Energy plans to nearly triple installed capacity to about 6.7 gigawatts in 2024 from its capacity last year, and the company has said it plans to invest about 150 billion baht (S$6.5 billion) the next few years to build new plants in South-east Asia. The generator has also had discussions with provincial officials in Vietnam over plans for a US$7.8 billion gas-fired power plant, as well as talks with partners for a hydro project in Laos and a gas-fired plant in Myanmar.

Gulf Energy has gained about 19 per cent this year, boosting Mr Sarath's net worth to about $4.8 billion, according to the Bloomberg Billionaires Index.

Mr Sarath said he decided to embrace gas after protests against pollution persuaded the Thai government in 2002 to put on hold deals for some coal plants. There's public opposition to coal plants in Myanmar and Vietnam too, he said.

"Coal-fired power plants may have lower cost of fuels compared with natural gas," said Mr Sarath.

"But carbon emission has become much more of a concern."

BLOOMBERG