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How to improve disclosure in World Bank public-private partnership projects?


One of the issues with public-private partnerships (PPPs) that Bankwatch has been drawing attention to for many years already is the lack of transparency around many of the projects. The most basic questions too often go unanswered, including why a PPP is being used at all, how much it will cost over its lifetime, which budget will pay for it, how much the private partner will earn, and how much a traditional public procurement project would have cost instead.

The World Bank has finally started to recognise this problem and has drafted what it calls a Framework for Disclosure in Public-Private Partnership Projects. A public consultation is being held on the document until 29 February.

See the World Bank website for more information >>

The draft contains some positive elements but can certainly still be improved. If you’d like a kick-start in thinking about how disclosure could be improved in PPP projects, you might like to take a look at the recommendations from our report on the dangers posed by PPPs Never Mind the Balance Sheet (pdf, see page 48-50). The report was written back in 2008 but the recommendations are still as relevant as ever.

And don’t miss our website Overpriced and underwritten – the hidden costs of public-private partnerships with detailed explanations of PPP pitfalls, a bunch of case studies and a growing resources section.

UPDATED: New documents on European Investment Bank loans to Volkswagen

Documents obtained by Bankwatch provide more details for a European Investment Bank statement that its loans to Volkswagen may have been connected to the car makers use of cheating devices to rig emission tests.

With each passing day since Bankwatch revealed the European Investment Bank’s massive support for Volkswagen, it looks more likely that the EU’s house bank is indeed linked to the VW scandal through at least one of its loans. As the EIB’s president Werner Hoyer admitted during the bank’s annual press conference on January 14, the bank cannot rule out that a EUR 400 million loan to the carmaker in 2009 has been used to create a cheating device to rig emission tests.

The loan in question is one of 12 projects for which Bankwatch requested access to documents in September 2015. Two months later, after failing to meet an extended deadline, the bank provided heavily redacted documents for only two of these loans. After a final confirmatory application by Bankwatch it took another three weeks until the bank gave access to redacted versions of all finance contracts signed with the VW group and of the completion reports provided by VW to the EIB at the closure of each project. (See all documents in this Google drive folder.)

The EUR 400 million loan from 2009 mentioned by Hoyer was granted for the “Volkswagen Antrieb RDI” project under the Climate Action programme of the EIB and was supposed to help develop greener and more fuel efficient drive train components for passenger cars and utility vehicles to reduce emissions and improve energy efficiency in the European transport sector.

Our fear at Bankwatch is and was that the EIB has not done enough to monitor the performance of its client Volkswagen with regards to the stated environmental goals of the loans, which is why we requested these reports.

In the completion report for the “Antrieb RDI” project, VW reported significant pollutions emission reductions from the project, including reductions in carbon dioxide emissions and oxides of nitrogen.

The completion report’s length of merely 2 pages, including a cover letter, seems to be very little effort for reporting on an almost half a billion euro loan. But what sticks out is one component or car model (unclear from the information available) that – according to the report – complies with the world’s strictest emission standard SULEV (super ultra-low emission vehicle) – a US classification for passenger vehicle emissions. [*]

This could be a link between the EIB’s loan and VW’s emissions cheating – one that could have been noted 3 months ago had the EIB disclosed the documents. But with the EIB blacking out most of the information, including the cars or components that the emission reductions refer to, it is impossible to establish that link and the bank can continue to go about its internal investigation without public scrutiny – four months after the scandal broke.

Another interesting detail is that the financial contract for this loan is the most redacted of all twelve that the EIB disclosed. Most notably, only in this loan’s contract Volkswagen’s reporting obligations have been entirely redacted (or have not been part of the contract in the first place).

Bankwatch received these documents in mid December. With Hoyer’s revelations now at the EIB’s press conference, it seems the bank already knew one month ago that something might be fishy with the Antrieb RDI loan.

Four months after the Volkswagen revelations, the EIB is still not disclosing relevant information that is in European public interest – in contrast to its declaration of complying with EU principles on access to environmental information. What is there to hide, Mr. Hoyer?


* Update March 21, 2016: The text has been modified to remove a reference to the VW Jetta, which we found to be the only VW car compliant with the US emissions standard SULEV. As we found out subsequently, however, only the Jetta hybrid is SULEV compliant, but not the Jetta diesel, which was found to have excess emissions.

To this day, it remains impossible to confirm or dispel doubts over the EIB loans’ involvement in the emissions scam. With the EIB still not disclosing more information we’re left with speculations.

Romania and the Energy Union: little more than wishful thinking

When Maroš Šefčovič, the Commission’s Vice President for the Energy Union visited Bucharest in October 2015 to discuss Romania’s role in the overhaul of Europe’s energy sector, his speech seemed promising at first. It focused on renewables, energy efficiency and research and innovation – all issues that are rarely on the Romanian public agenda. But eventually, much like the Commission’s assessment for Romania (pdf) that was presented during the visit, the message and its level of ambition felt more like much ado about nothing.

According to the assessment, Romania’s progress towards its various energy goals (efficiency, decarbonisation, and renewables) is satisfactory, however the Commission fails to identify what prevents further progress. Specifically, the Green Certificates scheme, which facilitated emissions reductions and investments in solar and wind energy in the first place, is now under threat from the state’s energy and gas regulator ANRE.

Since Romania’s electricity market is marked by constant oversupply, ANRE decides about who gets to feed in their electricity. In 2015, ANRE reduced the annual mandatory share of renewable energy from 15 percent to 11.1 percent. Since Romania’s Green Certificates scheme links the support for renewable energy directly to the amount of electricity producers (are allowed to) feed into the national grid, their support has effectively been reduced by almost one third, resulting in what has been called the collapse of the green certificate market.

Mr Šefčovič’s speech, however, seemed to be strongly in favour of new energy sources, stating that the 21st century will not be about reserves of oil, gas or coal. He went further and insisted that being close to the 2020 targets should not create complacency, especially as local solar and biomass power show great potential.

Energy Union – torn between decarbonisation and fossil fuels

The vision of the European Commission’s Energy Union proposes making Europe a world leader in renewables and energy efficiency, but at the same time emphasises investments undermining that goal.

Read more

The Energy Union can therefore be a promising prospect for Romania’s sustainable energy sector if it counterbalances unpredictable government decisions, which have created an inconsistent energy policy, at times contradictory to the National Strategy. Often changing government policies have discouraged small and medium producers to invest further, while foreign companies are losing their interest in further developing wind power in Romania.

Unfortunately, the Energy Union is not as ambitious as Šefčovič’s speech suggested, and the focus remains on fossil fuel resources. The country assessment for Romania (pdf) suggests that the main challenges will be related to gas supplies. This is surprising as, unlike most EU countries, Romania’s dependence on foreign gas is low due to domestic reserves. The country is Europe’s fourth biggest natural gas producer (pdf) (after the Netherlands, Germany and the UK) , and it has the lowest dependence on natural gas in the EU, after net exporters Denmark and the Netherlands. Furthermore, following a decrease in consumption, gas imports from Russia have recently decreased.

However, Mr Šefčovič stated that Romania’s geographic location entails the development of its gas infrastructure, and the same goes for electricity, so that excess amounts could be exported “directly into Europe’s markets, both within and outside the EU”. But it isn’t clear at all where exactly this power will go, as most countries in the region, at least in the western Balkans, see themselves as potential electricity exporters.

The country assessment also states that the Energy Union could provide potential benefits for Romania in Research and Innovation (R&I) towards “low-carbon technology development”. Šefčovič also stressed in his Bucharest speech that technology is easier to export than resources. This is a welcome encouragement from the Commission, as Romania had the lowest expenditure on Research and Development in the European Union since joining in 2007, reaching an all-time low in 2013 of just 0.39%. At the same time, it is still unclear what sort of tools the Energy Union will provide for correcting this situation, and how the funding will compare with the one aimed at the fossil fuel industries.

In conclusion, the European Commission’s vision for the Energy Union in Romania is little more than wishful thinking. The push for renewables, energy efficiency and R&I seems to overlook local realities and offers no ways for changing them. At the same time, although large support was declared for alternative sources of energy, the fossil fuel industry has no reason to worry, as no commitment was made towards an actual change of the current European energy paradigm.

Guest post: New report shows that New Kosovo Power Plant would worsen poverty and cripple a fragile economy


The lignite-fired Kosova e Re or New Kosovo power plant project has been under development for more than a decade, yet there is still an astonishing lack of official information about it. The little information that has emerged has changed casually from year to year, even while the tender procedure has been going on. First the mines and rehabilitation of the existing Kosova B plant were included in the tender, then they weren’t. A decade ago the plant was planned to be 2000 MW, then it was tendered at 600 MW, then in November, the Kosovar Minister of Economy suddenly stated that it would be 500 MW.

During this seemingly endless saga, neither Kosovar politicians nor the World Bank, which is leading on the project development, has answered the all-important question of how much this plant would cost the public.

Now, however, the Institute for Energy Economics and Financial Analysis (IEEFA) has published a study (pdf) commissioned by the Kosovo Civil Society Consortium for Sustainable Development (KOSID), concluding that the proposed plant would likely increase electricity retail prices by 33-50 percent and result in the average Kosovar household paying 12.9 percent of its annual income for electricity. This is twice what most European households pay. Low- to middle-income households in Kosovo would spend 18 percent of their annual income for electricity, while very low-income households would pay a massive 39.7 percent of their income for electricity.

Such shocking figures shine a new light on embarrassing statements made by World Bank President Jim Yong Kim in 2013 about Kosovars “freezing to death” if the World Bank does not finance the new coal plant.

No-one will freeze to death if the bank does not provide a loan guarantee for the plant, but IEEFA’s report shows that if the World Bank and other multilaterals like the EBRD do support the project, low-income households may well end up choosing between electricity and food. Kosovo has already seen protests about high electricity bills, even though the per-unit rate is relatively low. Low levels of energy efficiency mean that consumption is relatively high, leading to high bills.

The report also sees construction of the New Kosovo Power Plant far exceeding the government’s projected cost of EUR 1 billion. It puts those costs at closer to EUR 4.2 billion by the time the plant goes online as planned in 2021 due to financing costs, and finds it financially unviable without massive subsidies.

Plans for the Kosovo C plant already looked worrying enough: 7000 people to be resettled to make way for mine expansion, crowding out investments in energy efficiency and sustainable renewable energy, climate impacts, health impacts from the new plant and expanded mine, irregularities in the tender procedure, lack of transparency about benefits for the private investor and potential clashes with Energy Community rules on state aid are just some of the problems we’ve identified with the project. IEEFA’s analysis now adds a whole plethora of new and largely unsolvable problems.

How can public banks like the World Bank, whose very mission is to end poverty, possibly justify continuing with this project?

Success: 391 hectares of Romanian forest saved in 2015


In December 2015 Bankwatch Romania received a special Christmas present when the Bucharest Tribunal decreed the final and irrevocable annulment [ro] of 27 deforestation decisions for 22 forest hectares in Gorj County. The case was brought by Bankwatch Romania against Oltenia Energy Complex (OEC) and the Forestry Guard Rȃmnicu Vȃlcea whose appeal has now ultimately been revoked, thus halting deforestations for the expansion of the Roșia coal mine.

According to the Forestry Law, only a decision from the Forestry Guard is needed if one intends to cut down a surface smaller than one hectare, but if the forest is bigger than 10 hectares a Government Decree is mandatory. Oltenia Energy Complex (OEC) attempted to avoid this law, slicing the land on which it intends to expand the Roșia lignite mine in parcels smaller than one hectare, thus obtaining 27 decisions for 22 hectares.

Therefore, OEC skipped a procedure through which it would have been mandated to study the environmental and social impact. But the company ignored the fact that the planned deforestations for the expansion of Roșia mine are actually much bigger, with an environmental permit for 159 hectares also being annulled at the beginning of last month.

Coal in the Balkans

Find out more

The final decision of Bucharest Tribunal came in the same month in which FERN, an European NGO for forest protection, published the study Double Jeopardy: Coal’s Threat to Forests (pdf). The authors show that at least 11.9 millions of forest lands, an area bigger than Portugal, are threatened due to coal exploitation. In Australia alone 1.3 million hectares are scheduled to be cut down which could lead to the disappearance of endangered species or surface waters. Indonesia intends to cut down 8.6 million hectares, or 9% of the country’s forests, with a devastating impact on indigenous populations.

The FERN Report also contains a case study on Romania, in which a clear disjunction emerges between folk wisdom, such as “Romanians are brothers to the forest”, and the fact that massive deforestations, a significant part illegal, have become habitual.

Local communities either don’t have the capacity to oppose mine expansion projects or are deluded by the jobs promised by OEC (even though the company employed half as many people [ro] starting with 2012 compared to 2009-2012). Severin Sperlea from the Runcurelu village expressed his regret this way:

“There used to be forests in this area. We had beautiful forests. Lands were full of trees: apple trees, pear trees, plum trees, cherry trees, vineyards. You always found some fruit to eat when you went to work in the field. Now they’ve gone because the mines have come.”

With this last decision in 2015, Bankwatch Romania could celebrate the saving of 391 hectares of forest through the annulment of deforestation decisions or environmental permits. Apart from the 27 deforestation decisions which allowed cutting down 22 hectares and the environmental permit for 159 hectares being annulled on December 7, two other environment permits for the expansion of the Pinoasa mine affecting 130 and 80 hectares were annulled on 17 February [ro] and 14 May [ro] respectively.

Health reports confirmed widespread over-exposure to toxic arsenic at Tsumeb smelter in Namibia

Following Bankwatch’s revelations about toxic pollutants at the Tsumeb smelter in Namibia, the smelter’s owner, Canadian mining company Dundee Precious Metals (DPM), contested our findings in Namibian news reports. Without substantiating its claims with facts, however, and in light of the results of local health surveys the company’s reassurances ring hollow and meaningless.

The Tsumeb smelter extracts arsenic and other compounds from copper ore, half of which coming from the Chelopech mine in Bulgaria. The smelting leaves behind the pure metal, but also highly toxic waste like arsenic trioxide. Bankwatch had warned that the smelter may be contaminating the local environment with these toxic substances both through evaporation during the production process as well as through contamination from the waste site.

In the Namibian Sun, a DPM’s spokesperson claimed that our blog post represented a “distorted and inaccurate view of [DPM’s] operations in Namibia”. The company cites a health study which “tested the urine of over 1 700 locals and found no unexpected elevations”, but doesn’t provide the study itself to support its claim. (Neither does DPM clarify what those expected elevations were and whether they can be considered safe – a crucial question, considering that already small amounts of arsenic trioxide can lead to multiple organ damage and death.)

The company even argues that “[…] there have been and are currently no significant health impacts from the smelter on workers and community members” – an assumption that is in dramatic disagreement with international standards of acceptable levels of arsenic intake.

Information available to Bankwatch shows that arsenic levels of Tsumeb workers have been way above safe limits defined by health institutions.

As we learned from the local community, health tests have been conducted by the government in three consecutive years since 2011. A preliminary report published in August 2013 (pdf) that summarises the findings from the 2013 survey states that “[r]ecent urinary arsenic concentrations confirm current widespread over-exposure at the plant”.

In its introductory notes, the report, prepared by the National Institute of Occupational Medicine (NIOH) and supported by the Ministry of Environment And Tourism Namibia, refers to findings from surveys in March 2011. At that time the average arsenic concentrations in the urine of DPM workers were at 251 micrograms per gram creatinine (251 μg/g). This is much higher than the maximum acceptable level set by a range of health institutions worldwide.

As a reference value for over-exposure the report uses the Biological Exposure Indices (BEI) set by different institutions. A BEI is a reference for recommended concentrations of hazardous substances. As the report notes, the South African BEI (defined by the Department of Labour) lies at 50 μg/g.

Since basic urine tests don’t distinguish between toxic and non-toxic forms of arsenic, the report notes that 50 μg/g should not be used as a threshold without more detailed tests, but that values above 100 μg/g “generally indicate excessive absorption of inorganic [i.e. toxic] arsenic (but may be explained by organic [non-toxic] arsenic […]).”

Whichever one of these levels is being consulted, the Tsumeb smelter workers average arsenic concentration was by far higher than any level that could be deemed safe.

Continued contamination at reduced capacity

Following the results of audits in 2011 into the Tsumeb smelter’s health and environmental impacts, Dundee Precious Metal had to reduce its capacity feed by half in 2012 and was ordered by the Namibian government to introduce technological improvements. The capacity restrictions were lifted in December 2013 after the government had accepted DPM’s upgrade measures.

However, as we found out during our visit to the Tsumeb community, a cloud of doubts hangs over the company’s promises to have cleaned up its operations – just as the cloud of white dust that could be seen hovering over the smelter.

And indeed, the 2013 survey produced equally disturbing results.

As the tables below show, of 1082 DPM employees at the time, urinary arsenic levels of above 300 μg/g were measured in all sections of the smelter except the Slagmill. 69% of the people tested exceeded the level of 100 μg/g.

The most affected 3.5% of cases even reached levels between 507 and 1357 μg/g.


Source: Preliminary Report on the Survey of Namibia Customs Smelter Workers, Tsumeb, Namibia, pg. 6-7

In the Republikein newspaper, DPM claimed in early December that the exposure to inhalable arsenic has been reduced by half in 2014. These claims have so far not been substantiated with publicly available documents, let alone with results from new health tests. But even if such reductions were achieved and effective, almost one third of the workforce would still be above the critical level of 100 μg/g. [1]

The 2013 health report states several times that more detailed analysis will be presented in a final report. If DPM’s claims about its success in reducing arsenic pollution are supported by this report, why is it not being made public? Does such a report exist at all? The people in Tsumeb that we interviewed during our visit had not seen or heard of it.

Unclear impacts on the town of Tsumeb; company and government remain silent

Even more uncertainty surrounds the impacts on the town of Tsumeb. The health reports Bankwatch had access to only covered DPM employees and former employees. But without evidence to the contrary, the information available so far and the situation we have found on the ground suggest that arsenic contamination in Tsumeb by the smelter is at least likely. With the smelter’s capacity not being restricted anymore, the arsenic trioxide generated by the smelter’s operations could turn into an environmental time bomb for Tsumeb.

As Bankwatch has described earlier, the production waste that includes the highly toxic arsenic trioxide is being stored in sugar bags at a dump-site located just a few hundred metres away from houses in Tsumeb (see photo).


A satellite image showing the close proximity of the dump site to residential houses in Tsumeb.

DPM claims it has an elaborate monitoring system to make sure no air and water contamination takes place and that the dump site is regularly being inspected by the Namibian government. Without substantiating these claims with facts, however, and in light of the health reports’ outcomes such claims sound hollow and meaningless.


A closeup of the Tsumeb waste disposal site. Clearly visible are the damaged bags containing residue from the smelter.

Nine months ago Bankwatch began requesting information from both Dundee Precious Metals and the Namibian government regarding the environmental permits of the Tsumeb smelter. Even though documents like the Environmental Impact Assessment and the Environmental Clearance Certificate should by law be publicly available [2], neither Bankwatch nor our Namibian partners Earthlife Namibia and the Legal Assistance Center were able to get access to them.

Until detailed information on the environmental performance of DPM’s Tsumeb smelter is available to others than those with a vested interest in the project, the continued poisoning of the town of Tsumeb is a possibility that cannot be ruled out.

Given the health impacts of substances like arsenic trioxide, such a risk should not be taken lightly, neither by Dundee Precious Metals nor by the government of Namibia.

Notes

1. This is based on the simplified assumption that the arsenic levels in the table above would now be half as high and thus all results above 200 μg/g in the table would now be above 100 μg/g.

2. As stated in the Environmental Management Act 7/2007 of the Republic of Namibia in Art. 17 (g) and (h) the Environmental Commissioner should maintain a register of the undertaken Environmental Assessments and the issued Environmental Clearance Certificates and “a copy of the record must be made available for public inspection at the office of the Environmental Commissioner during office hours” Art. 38 (3)