Rolling blackouts in South Africa have put the spotlight on the World Bank’s investment in the 4800 mega-watt Medupi coal-fired power station – the Bank’s last project investment in coal – with some economists calling for it to be shut down in favour of investment in other existing energy infrastructure.
The Bank approved a $3.75 billion loan to South Africa in 2010, primarily to help cover the construction costs for Medupi (see Bretton Woods Update 70), but eye-watering cost overruns have hit the project. The Bank now estimates the cost of co-financed projects associated with the loan at $18.4 billion – an increase from $13.86 billion at appraisal – largely due to Medupi.
In addition to economic and environmental concerns, Medupi – which is the largest coal power plant currently under construction globally – has also been dogged by corruption allegations. Japanese contractor Hitachi reached a $19 million out-of-court settlement in 2015 related to alleged bribes paid to the ruling African National Party in relation to the bidding process for Medupi’s construction.
Recent blackouts have been partly blamed on multiple design flaws at Medupi, which have caused a temporary shutdown of the power station’s three operational units (out of eight initially planned), for repair or maintenance, according to South African news outlet City Press.
South African academic Patrick Bond argued in January, “If ever some form of international financial justice is served, the World Bank would be forced to take a haircut on its Medupi loan, and also pay reparations for this exceptional energy disaster.”