The never ending saga of the Nenskra HPP

Last year, 96,000 European Union citizens united in solidarity with the Svans, an indigenous people in Georgia, in their fight against the Nenskra Dam. The thousands of supporters who signed the petition to #StopNenskra called on the presidents of the European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD) not to sign the loan contract for the Nenskra hydropower plant (HPP) because it threatened biodiversity, did not comply with legislation, and violated human rights. The international petition was one of many actions taken during years of struggle against Georgia’s billion-dollar dam.

Solidarity proved to be effective. Recently, the accountability mechanisms of the EBRD and EIB published the conclusions of their two year investigation of the Nenskra project. They concluded that Nenskra is non-compliant with the banks’ own standards on indigenous peoples’ rights, the protection of cultural heritage, gender issues, the assessment and management of environmental and social impacts, information disclosure and engagement of local communities and other stakeholders. These issues have been at the core of local communities’ and activists’ struggle for the last few years. 

In Georgia, large hydropower plants are considered the fastest way to achieve energy independence. Surprisingly, international financial institutions, such as the Asian Development Bank (ADB), EBRD, EIB, Asian Infrastructure Investment Bank (AIIB) and others, continue to support this idea, disregarding the fact that the country has no energy strategy which would support such investments.

The beginning 

The story of Nenskra starts on the morning of 23 April 2012, when Chuberi villagers unexpectedly saw Georgia’s then-president Mikehil Saakashvili holding the opening ceremony for the Nenskra HPP construction. Locals had never heard of the project before. Since then, the ghost of the unborn Nenskra HPP has created confusion and irritation among the villagers, and its potential benefits remain blurry. 

The Nenskra HPP project is a 280 MW reservoir-type hydropower plant, located in the Nenskra and Nakra valleys of Svaneti. The project costs were estimated at up to USD one billion in 2018, and the AIIB, EBRD, EIB and ADB planned to finance it, along with a number of export credit agencies, including Korea Development Bank. The project sponsor, JSC Nenskra Hydro, is majority share-owned by Korea Water Resources Corporation and the Georgian state-owned JSC Partnership Fund.

Svaneti is a region inhabited by the Svans, a Georgian ethnic group that leads a unique, self-sufficient lifestyle and has its own distinct cultural and religious tradition. The Svans already experienced the devastating impact of the Enguri Dam, which was constructed in the Soviet period. Since 1979, Svaneti has been home to a resistance movement against Khudoni Dam, which, if built, will flood the village of Khaishi, just next to Chuberi. The movement’s first victory was the 1989 decision of Georgia’s Soviet government to stop construction on Khudoni. However, different Khudoni projects have been popping up with frightening regularity, and the people continue to fight against them. In 2020, the government of Georgia and investor Transelectrica LTD  are working to terminate the most recent attempt to build the project, based on a contract from 2009. According to the plans, the Khudoni HPP should have begun generating electricity by 2017. 

A troubled dam

The Nenskra project, which received environmental and construction clearance from the Georgian government in 2015, fails to recognise the cultural and property rights of Svans or to properly identify the impacts of the proposed hydropower plant on their livelihood. The poor quality assessment of the Nenskra project, together with the  promoters’ neglect of the locals’ opinion, have only aggravated the fading public acceptance of Nenskra.

The approved project does not comply with the aforementioned banks’ environmental and social safeguards. Therefore, in 2016 and 2017 the project promoter was forced to redesign the type and height of the plant, as well as the locations and design of weirs, among other elements of the project, to ensure the safety of the dam for local communities and the environment. 

The first sign that the Nenskra HPP saga would continue was when the EBRD and EIB approved the project’s financing in early 2018. In January 2018, the EBRD approved a senior secured loan of USD 214 million and a USD 15 million equity investment for the Nenskra project, and in February 2018 the EIB approved USD 150 million; however, the loans have not been signed yet.

Lalkhor – the community’s unprecedented response

In March 2018, the Svan communities responded with an unprecedented move: they organised a Svan council meeting known as the Lalkhor and published a joint declaration underlining that the Svans ‘represent ancient, indigenous, aboriginal, autochthonic people with priority advantage and all around legitimate entitlements and authority over the territory of Svaneti’. They also stated that the  ‘protection of … nature is one of [their] supreme duties,’ and that they ‘unconditionally and eventually forbid construction of hydro power plants, gold mining and any other activities that harms nature, livelihood, material and non-material cultural heritage in the entire Svaneti! From now on hydro power plants in Svaneti will not be constructed including: Khudoni HPP, Nenskra HPP, Mestiachala HPP and other more than 50 HPPs planned in Svaneti!’

A few weeks later, the ADB’s Compliance Review Panel (CRP), in response to a complaint made by Chuberi and Nakra villagers, found prima facie evidence of noncompliance on a number of issues, including an insufficient assessment of project alternatives, noise and vibration impacts during construction and operations, health and security risks for the local population, and the absence of an assessment of environmental impacts of associated facilities. The CRP requested further investigation. 

Instead of a full investigation, the ADB Board of Directors requested that the ADB’s management prepare a management response action plan to address all instances of non-compliance and the concerns identified in the eligibility report. This was considered the most cost effective alternative. 

However, Salini Impregilo, the project’s main construction contractor, left the project without explanation shortly afterwards. The promoters were required to hire a new contractor, and due to the change in technical expertise, the project was likely to see critical changes to the contractual structure underlying it. This was also likely to create significant cost overruns. Thus, ADB management placed the preparation of the Management Action Plan on hold until a new contractor could be found. 

In January 2019, the Ministry of Environmental Protection and Agriculture of Georgia reapproved the environmental impact decision from 2015 based on new ESIA documentation. The new ESIA was approved in violation of the Georgian Environmental Assessment Code, without any public consultation, despite the fact that almost all of the project’s details had been changed. In addition, after devastating floods on 5 July 2018, the natural and social environment of the whole project area, including Chuberi, was changed, which the Ministry did not consider during the decision-making process. Angry locals appealed to the National Court for the annulment of the decision shortly after.

In parallel, villagers patiently waited for the outcomes of complaints submitted to the EBRD’s Project Complaint Mechanism (PCM) and EIB’s Compliance Mechanism (CM) in June 2018, together with Green Alternative and Bankwatch. Only in late summer 2020 were villagers informed that both mechanisms had recognised that the project does not comply with the international banks’ standards in the vital fields of human rights and environmental protection. 

What the international banks say now

Both institutions had previously claimed that the Svans are not an indigenous people, as they don’t fulfill all of the banks’ criteria for recognition as indigenous peoples. The EIB refused to disclose the documents justifying its position, claiming that it would heavily impact the ‘current geopolitical situation in Georgia and the sensitivity within the political debate of the status of the Svan population’, which ‘would undermine the protection of the public interest as regards international relations, as covered by article 5.4.a of the EIB-TP.’

The complaint mechanisms of both the EIB and EBRD found that the banks’ policies regarding indigenous peoples’ criteria were violated. According to the indigenous peoples expert consulted by the PCM and CM, the good international practice is to ‘consult a self-proclaimed indigenous community concerning the application of any eligibility criteria that will be used in the determination of whether the group constitutes an indigenous people. Such consultation would be part of project due diligence, and will demonstrate good faith in the question of determining whether the eligibility conditions are met’. 

Other instances of noncompliance include the protection of cultural heritage, addressing gender challenges, the assessment and management of environmental and social impacts, labour influx, information disclosure, and engagement of local communities and other stakeholders. The PCM found that the project is incompatible with five out of ten of the EBRD’s social and environmental performance review requirements. 

The findings regarding indigenous peoples and negligence of project alternatives, which should be core elements of any Environmental Impact Assessment but were absent in the case of Nenskra, were underlined in both redress mechanism reports. The reports make clear that Nenskra still has a long way to go until it can be transformed into a project that is acceptable for Svans and that offers a sustainable solution to the country’s energy challenges (if such a project is possible at all). 

Independent from the costs associated with resolving the Svans’ complaint, the costs of the Nenskra HPP are expected to increase, due to other problems the project has experienced. These include the year-and-a-half-long search for a new major construction partner for the project.

In December 2019, South Korean media reports celebrated the fact that Hyundai Engineering & Construction (Hyundai E&C) and Limak won a USD 737 million tender to realize the Nenskra project.  However, the news was never confirmed. This announcement is also concerning due to the fact that Hyundai E&C and Limak have been connected with a series of financial and corruption scandals.

In addition, the Bern Convention Standing Committee in its April 2020 meeting reexamined a complaint made about the possible threat posed by the Nenskra HPP to Svaneti 1 as a Candidate Emerald Site. In their decision, the Committee noted ‘the concerns of the complainant on the reduced scale and scope of the proposed Emerald Network sites, which exclude areas where hydropower plants are planned to be constructed, the lack of protection of large rivers and the lack of strategic planning for hydropower development in Georgia’. It also ‘invited the authorities to envisage a national plan for the protection of water courses to avoid the situation replicating in other Emerald Network sites’.

While the governments of Georgia and Korea, as well as the management of the EBRD and EIB, attempt to convince Georgian and EU citizens that the Nenskra project will be done in the near future, the prospect of the fast, non-problematic construction of the Nenskra HPP dwindles. Meanwhile, the belief that Nenskra will be the energy security cornerstone for Georgia’s economic development has been questioned by both the IMF and the World Bank.

The EBRD, EIB, ADB and AIIB should not consider financing the Nenskra HPP, given all of the problems mentioned and its long standing bad reputation. In order to support Georgia’s energy security, they should instead finance more feasible and less harmful projects that benefit the communities and citizens of Georgia.