Japan, one of the last countries in the world to support coal-fired generation overseas, is conducting an environmental and social impact assessment for an expansion to the Matarbari power plant.
In an email, Japan International Cooperation Agency (Jica) already agreed to finance the first 1.2 gigawatt phase of the project that is scheduled for completion in 2024, but hasn't decided if it will finance the expansion, which would double the facility's capacity, Bloomberg reported.
"In spite of difficulties, my government decided to do a survey and research on unit 3 and 4," Naoki Ito, the Japanese ambassador to Bangladesh, said Thursday during a webinar hosted by the Centre for Policy Dialogue in Bangladesh, referring to the expansion. Changing climate policies have led the country to scrap dozens of plans for new coal plants, he said.
Japan agreed in August to support expanding the Matarbari plant with three additional units planned in a second phase of construction, according to a Japanese government official, who asked not to be identified citing policy. However, Japan hasn't yet formally committed to providing loans for the second phase, said the official.
Institutions providing financing for coal-fired generation are under increasing pressure from investors to exit the sector amid fears that the facilities will become stranded assets that pose financial risk, as governments seek to decarbonize economies.
Jica's decision whether to finance the Matarbari expansion won't impact its credit rating as long as it is tied to the Japanese government, said Atsushi Moriya, an analyst with Rating And Investment, which rates Jica AA+. Jica is a government agency that provides overseas aid in developing countries.
The expansion may prove awkward for Prime Minister Yoshihide Suga, who has pledged to make Japan carbon neutral by 2050. While the country has tightened conditions for participation in overseas coal projects, it has left the door open to new plants if recipient countries commit to long-term decarbonization and support only the highest-efficiency plants.
Japan Bank for International Cooperation Governor Tadashi Maeda said earlier this month that the state-run lender has no immediate plans to finance any new coal-power projects. JBIC in December agreed to provide about $636 million worth of project financing for the Vung Ang 2 plant in central Vietnam.
Japan's commercial banks, including Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., have pledged to phase out coal power financing amid pressure from environmental groups and investors.