EBRD – eyes wide shut to coal sector corruption

6 January 2014, The Ecologist

The European Bank for Reconstruction and Development has been financing coal mining companies implicated in criminal corruption allegations – according to a Bankwatch analysis.

A Bankwatch investigation has reavealed that the EBRD has gone ahead with financing three huge coal projects in Slovenia, Serbia and Romania – even though the coal companies were implicated in recent corruption scandals.

Bankwatch’s Pippa Gallop, who coordinated the Coal and Corruption study, said:

“The EBRD is risking its reputation by repeatedly committing to financing projects while national and even European authorities are investigating corruption allegations.

“Under no circumstances can a public bank justify getting involved in projects where the risk of misuse of funds is big enough to spark criminal investigations.”

“In all of these cases well-founded corruption allegations were publicly revealed before the bank approved the projects, yet the bank still went ahead.”

The suspect projects are:

Slovenia: Sostanj lignite power plant. EBRD signed off a €200 million loan in 2011 and disbursed early in 2013 – in spite of an ongoing investigation into the project by the European Anti-Fraud Office OLAF.
Serbia: Kolubara lignite mines. These mines were part of the €80 million Kolubara mine improvement project loan, signed in 2011 by the EBRD. Serbian authorities are investigating the company on multiple corruption scandals involving EPS management and practices.
Romania: Turceni lignite power plant and mines. EBRD approved an unsuccessful rehabilitation project in 2008, then re-approved it in 2013 although a number of corruption allegations involving management of the project developer had since come to light. This autumn five people including an MP were sentenced to jail for up to seven years over one of the allegations.

The Report concludes:

“The bank has not done itself any favours by proceeding with projects in which the national authorities and even OLAF in one case were undertaking corruption investigations. By doing so, it has sent a message to the public and affected companies that integrity is negotiable.”

EBRD is one of the last multilateral development banks to extend unrestricted loans for coal projects. The Nordic Investment Bank, World Bank, European Investment Bank and US ExIm Bank have all seriously limited lending for coal.

EBRD is coming under increasing pressure to do the same in order to reduce Europe’s carbon emissions, together with the other pollution associated with coal combustion.

The UK, US and Scandinavian countries are among the EBRD member states favouring a clamp down on EBRD’s coal lending. Poland, which hosted the COP19 climate talks in Warsaw, has emerged as the cheerleader of the pro-coal lobby.