Arrie Rautenbach, Absa CEO.
- Absa says it is not involved in funding Karpowership in SA, and while it considered this, it has taken a decision not to.
- The bank was named as a possible project financier in a recent application lodged with the energy regulator.
- Absa has also defended its balanced approach toward decarbonisation.
- For more financial news, go to the News24 Business front page.
Absa Group has settled on a final position not to fund the controversial Karpowership projects in South Africa, it confirmed on Friday.
Speaking at the banking group’s annual general meeting on Friday, chairperson Sello Moloko cut short a question posed by an activist organisation to confirm that Absa would not be funding the Turkish company’s emergency gas-to-power projects.
“We are not involved in the funding of Karpowership,” Moloko said. “That is a simple and a straight answer from us.”
The bank has previously engaged in funding talks with Karpowership and has previously insisted that any potential financing arrangement with Karpowership would be subject to independent legal, technical, environmental, insurance and reputational due diligence processes.
Leanne Govindsamy, head of the corporate accountability and transparency programme at the Centre for Environmental Rights, said Absa had been noted in an unredacted version of a recent Karpowership application to the National Energy Regulator of South Africa.
“We understand that Absa, together with the Development Bank of Southern Africa, will finance Karpowership South Africa through debt and equity loans which have an 11-year term,” Govindsamy said.
In 2021, reports suggested that Absa, Investec and the Development Bank of SA had emerged as possible financiers.
Absa CEO Arrie Rautenbach would not be drawn on why the bank’s name appears in documents.
“We are not involved,” he said, adding:
Of course, as part of the original processes, there were possibilities that we would have considered this funding of financing, but we’ve made the decision clearly not to get involved. So I think that’s the final position on this.
Karpowership was named a preferred bidder in government’s Risk Mitigation Independent Power Producer Procurement Programme in 2021. It was to provide over 1 200MW of power from floating gas-power vessels located at three of South Africa’s ports – Richards Bay, Saldanha and Coega.
However, the project has faced a number of challenges, including criticism of its expense over a 20-year period, and refusal of its environmental authorisation for the three vessels. Karpowership has been given a second opportunity to submit its Environmental Impact Assessment reports for authorisation. Government is now also in discussions about shortening the contract period to between five and 10 years.
Robyn Hugo, director of climate engagement at Just Share, a shareholder rights organisation, asked Absa how it justified high financing caps for fossil fuels in light of its ambition to contribute to a sustainable and low-carbon future.
“These limits are so high above your current levels of exposure, that you can continue to increase your exposure to oil until around 2030, to coal until at least 2040, and to gas even beyond 2050, meaning that your financing strategy is not aligned with climate science,” Hugo noted.
Moloko said Absa aims to take a balanced approach to decarbonisation, and while it would not take on any new exposure to fossil fuel, it needed to be mindful of the unique context of each country in which it operates.
Francis Okomo-Okello, chair of Absa’s Social, Sustainability and Ethics Committee, agreed that the market economies, the resource bases, and socioeconomic challenges of countries in which Absa operates “dictate that we take a very balanced view in terms of how we manage the decarbonisation programme”.
He said: “We cannot ignore the developmental challenges that these economies face … So we really have to strike a balance between the environmental imperatives as well as the social challenges that come along with participating in a meaningful decarbonisation problem.”
With Lameez Omarjee