PRC Gets $135 Million ADB Loan for Power Plant Using New Coal Technology

Asian Development Bank (ADB) , 8 February 2010

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is supporting the construction and operation of a coal-fired integrated gasification combined cycle (IGCC) power plant in the People’s Republic of China (PRC), the first such plant in a developing nation.

The ADB Board of Directors today approved a $135 million loan to build a 250-megawatt IGCC plant in Tianjin City that can generate up to 1,470 gigawatt-hours of electricity every year.

PRC is the world’s largest coal producer and consumer. Its heavy use is causing serious pollution, including sharply lowered air quality and widespread acid rain. The large coal usage is also causing global concerns due to rising greenhouse gas (GHG) emissions. In response, PRC has launched a clean coal power generation program, GreenGen, to sharply reduce pollution as well as lower the GHG emissions, with the Tianjin project being the cornerstone of the first phase.

ADB is also providing $1.25 million in technical assistance to pave the way for the second and third phases of the program which will result in a scaled-up IGCC plant fitted with carbon capture and storage technology by 2013.

Plants using IGCC technology turn coal into a synthetic gas, removing impurities, before the gas is burned in a gas turbine. It is more efficient than other clean coal technologies and emits less GHG and only a fraction of sulphur dioxide and nitrogen oxide pollutants, but its adoption has been slow due to high costs and some perceived technology complexity and risks.

The advent of IGCC technology combined with a carbon dioxide capture and storage function, however, has provided fresh impetus for its use, with studies showing that it is now the least-cost option to cut carbon dioxide emissions from coal-fired power plants by up to 90%.

“The project will demonstrate the advantages of a technology with the potential for large greenhouse gas emission reductions. Its successful implementation will bolster the confidence of investors, project developers, and policymakers leading to scaled-up IGCC power plants and their expanded deployment,” said Ashok Bhargava, Principal Energy Specialist in ADB’s East Asia Department.

To help curb risks linked to the adoption of the new technology and to keep costs down, ADB is providing a $5 million grant from its Climate Change Fund to finance direct supervision and technical support from the component suppliers during the critical initial operation and maintenance phase. It will also be used to help strengthen project management capacity and to ensure compliance with key safeguards.

As the IGCC technology reduces coal use and GHG emissions, the project is expected to be eligible for carbon credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol. ADB is providing technical support to help with the CDM registration process.

ADB’s loan from its ordinary capital resources makes up 32% of the total project cost of $419.59 million. The loan has a 26-year term, including a grace period of six years, with the interest rate determined in accordance with ADB’s LIBOR-based lending facility.

The loan component is due for completion by June 2012 and the grant component by June 2015.

The remaining costs will be funded from equity contributions of $84 million, a loan of $195.59 million from a group of local banks, and the grant from ADB’s Climate Change Fund - established in 2008 to invest in projects which address the causes and consequences of climate change.

China Huaneng Group, the managing partner of the government’s GreenGen program, is the executing agency for the project.

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