Blog entry

Marubeni, hands off Plomin!

As Marubeni executive Hiroshi Tachigami attended today’s Energy Market Conference in Zagreb this morning, Greenpeace activists hung a banner from the Vatroslav Lisinski concert hall in Zagreb, advising Marubeni to keep its hands off the Plomin C coal power plant project.

Marubeni was in September chosen as preferred bidder, along with Alstom, for the 500 MW project, which would run on imported coal. Negotiations are now ongoing with the companies with a view to signing a contract for a strategic partnership to build and operate the coal plant.

As well as all the usual drawbacks associated with coal such as climate and health impacts and its increasingly poor economics, the choice of Marubeni and Alstom as preferred bidders has raised eyebrows due to Marubeni having been convicted of corruption in two cases and Alstom in at least seven in the last few years. As a result, Marubeni is currently barred from receiving financial support from the Japan International Co-operation Agency (JICA) and Alstom is on the special observation list of the Norwegian Pension Fund Global.

Unsurprisingly Croatia is anxious to bring in investors to kick-start its ailing economy, but Plomin C’s economics have been roundly criticised from the start. Recent information received unofficially suggests that the price set for the Croatian electricity company HEP to buy electricity as part of a long-term power purchase agreement from the Plomin C plant may be around double that of the current market price. If this turns out to be true then the 64 percent of the population found by an opinion poll to be against the project earlier this year will no doubt rise even further, and perhaps we will finally have an opportunity for a real debate about the country’s energy future.

(See more images from the protest on Greenpeace Croatia’s facebook page)

Can the European Investment Bank move ahead of the pack on climate?

For some years now, the European Investment Bank (EIB) has invested about a quarter of its portfolio in projects with a positive impact on the climate via its Climate Action Programme. While this is a good start, there is no guarantee that the remaining three quarters of the bank’s lending does not undermine its progress on combating climate change.

Last year the EIB became one of the first multilateral financial institutions to show leadership and act on the threat of climate change. The bank adopted a policy that all but ended support to coal power plants by introducing a ceiling on emissions generated by energy projects (a so-called Emissions Performance Standard). This ensures that loans like the 440 million euros for a new, 600 megawatt lignite unit at Sostanj in Slovenia don’t happen again.

Restricting lending for carbon-intensive energy generation is a welcome development at the EIB. But what of the pipelines, refineries, highways and airports currently on the EIB’s books that are responsible for countless climate-damaging emissions and threaten the EU’s ability to meet its long-term goal of a decarbonised economy in 2050?

By separating loans benefiting the climate from the rest of the EIB’s activities, perverse effects are achieved: in spite of its Climate Action Programme, the EIB still lends three quarters of its research funds (around 10 billion euros annually) to the automobile industry. What is more, efficiency improvements at coal or gas plants are categorised as climate-friendly when in fact they prolong the lifetimes of the plants, leading to more emissions overall than are cut via efficiency measures. And the bank’s stance remains ambiguous on new forms of energy that are a threat to the climate like shale gas.

The future of the EIB

These questions are even more relevant when we have in mind the increased role envisaged by Juncker for the EIB in spurring growth in the EU. Already observers are sending warning signs that the new commission is pushing Europe away from climate and environmental concerns, precisely as the world is in the last stages for reaching a climate deal in Paris next year. There is a threat that the EIB could be pushed in the wrong direction too.

As a case in point, the EIB is set to offer priority funding for Europe’s Projects of Common Interest. Of the 248 projects on the list, 100 are for natural gas transmission, including new pipelines for imports of gas into the EU. Yet such projects only increase Europe’s reliance on fossil fuel imports, hardly contributing to resource resilience.

The EU’s goal of making its economy carbon neutral by 2050 means that climate considerations must become part and parcel of any economic activity conducted in the bloc. Against this backdrop, marginally lending to climate while still putting money in fossil fuels is not enough. The EIB, which has a mission to implement EU objectives, must develop a full-fledged Climate Policy, which would make explicit the EIB’s intent to phase out support for fossil fuels by 2016.

To make this work, the bank should come with a roadmap for a steady, annual increase of investments in new renewable energy projects and energy efficiency measures that reduce demand and support upgrades to electricity grid infrastructure in order to support the transition to a near-zero carbon future.

In addition, the EIB needs a Climate Policy that requires for any relevant project a ‘mainstreaming’ of climate change considerations. For example, in the transport sector projects proposed to the EIB for funding would be selected based on a ‘climate-friendliness’ rating applied during appraisal, weeding out the most carbon-intensive proposals and leading to an overall reduction in emissions for the bank’s transport portfolio.

Local energy projects await funding

At the same time, existing EIB initiatives aimed at energy savings like JESSICA or ELENA receive little attention in the Member States of central and eastern Europe, whose economies, including households and the public sector, are on the whole more carbon-intensive. Understanding better the needs in these countries and promoting readily available solutions should form part of the new Climate Policy.

The EIB is wont to argue that not enough projects come its way in the green energy sector, so the bank has to lend to dirtier business. This is, however, only a result of the fact that the bank mostly communicates with the big companies and governments it knows and trusts as business partners. These established relationships therefore tend to preclude a proactive search for those projects that are most in need of favourable financing.

A Climate Policy would necessarily target small and medium enterprises such as cooperatives, community-driven initiatives and mixed municipality or community projects, where plenty of ideas for sustainable initiatives abound but without the requisite financing.

Examples from the last 2007-2013 EU budget show that when national investment schemes into energy efficiency and small-scale renewables are launched, the money usually disappears in a heartbeat.

In many countries, community-based renewable projects are still novel and their access to commercial funding is limited. Where commercial banks lack expertise and interest, the EIB can build a strong presence to move community renewables in the Member States of central and eastern Europe from a budding niche to a fully-recognised economic opportunity for the financial sector.

Such projects demonstrate how the EIB – guided by a robust Climate Policy – can lead Europe away from a dependency on fossil fuels and contribute to the continent’s energy security and decarbonisation.

Zagreb Mayor arrested – and not before time

Something quite amazing happened yesterday evening in Zagreb. The Croatian police and the State Prosecutor announced that several people had been arrested on suspicion of a number of criminal corruption offences, abuse of office and peddling influence. Among the arrested were Zagreb Mayor Milan Bandic, Head of Zagreb Holding municipal company Slobodan Ljubicic, the head of the ZET public transport company Ivan Tolic, head and part-owner of the CIOS metal recycling company Petar Pripuza and around 15 more un-named people.

I say ‘amazing’, because it seemed like it would never happen. Ever since Milan Bandic came to power for a third term as Zagreb Mayor in 2005, NGOs including our member group Zelena akcija/Friends of the Earth Croatia and the Croatian media have been drawing attention to deals which excessively benefitted private companies at the expense of the public, raising questions about possible corruption. Some media reports suggested that the State Prosecutor had as many as 200 requests for investigations against Bandic waiting to be dealt with, but they never seemed to result in any action being taken.

Now, finally, of the deals questioned by Zelena akcija are now reportedly under scrutiny by police in connection with the arrests made, although this has not been officially confirmed.

Exposing the myth

Public-private partnerships are not a silver bullet for public infrastructure. Our website Overpriced and underwritten exposes the hidden costs of PPPs.

Right at the beginning of Bandic’s first mandate he signed the contract for Zagreb’s EBRD-financed oversized and overpriced wastewater treatment plant public-private partnership.

Among the numerous problems with this plant is that it churns out waste sludge which is not sufficiently treated to be used for land reclamation or other purposes. This then gave Bandic and others an excuse to push the construction of a huge waste incinerator in Zagreb, which would burn the sludge along with household waste.

This omission in the wastewater plant’s technology at the very least plays into the hands of those pushing for an incinerator, and seeing as the incinerator was promoted by Novum, later part of EVN, which is one of the concessionaires for the wastewater plant, it seems likely it was done on purpose.

Nevertheless, although both the EBRD and EIB were both considering financing Zagreb’s incinerator, both of them wisely declined to proceed with the project, partly as a result of Zelena akcija’s arguments on the need to concentrate on waste prevention and recycling before constructing such a massive, expensive and inflexible facility.

However, in the absence of almost any measures to prevent, recycle and compost waste by the city authorities, the incinerator project rose from the dead again. Most recently Mayor Bandic blatantly abused his position in pushing Zagreb’s new waste management plan through a vote in the City Assembly. The plan was supposed to be voted on 25 September but seeing that he might not get enough votes due to some of his tame representatives being absent from the meeting, Bandic withdrew all the agenda points from the meeting just one day in advance, thereby forcing the head of the Assembly to re-schedule it.

Needless to say, on 9 October when the meeting was finally held, the Plan passed – although not without protests from NGOs and local residents – and both the largest political parties voting against the plan.

Yesterday’s arrests mean that the incinerator project is now standing on thinner ice than ever and any investors and financiers interested in it would be wise to keep their distance. But more broadly it also means that financing institutions like the EBRD and EIB need to take more care about who they do business with. Just a few years ago former Prime Minister Ivo Sanader was widely accepted by the international community as the person leading Croatia into the EU. Now he’s in prison for corruption. It looks like it’s going to be a similar story with Milan Bandic – one minute a partner for investors, the next minute, arrested for corruption. It’s high time for international bodies to stop trusting so much the stories told by politicians and taking more seriously warnings from civil society and the media.

[Campaign update] Rovinari power plant put on ice

UPDATE November 3, 2014: On October 31, Oltenia Energy Complex and China Huadian Engineering after all signed the joint venture agreement for the Rovinari power plant.

The steps to create a Romanian-Chinese joint-venture that would build a 500 MW coal power plant in Rovinari were frozen according to Laurentiu Ciurel, CEO of the Romanian company Oltenia Energy Complex.

Though there were many discussions in the last two years about the construction of the new plant, concerns have been raised lately about its profitability, once the feasibility study was completed.

The main concern appears to be that the Oltenia Energy Complex – the company that represents the Romanian side of the joint-venture – on several recent occasions had to sell its energy for a price way under production costs. There were times when the energy complex sold its electricity for as little as EUR 0.25 /MWh [ro] – not even one per cent of the production costs of EUR 35-55/ MWh. This price is not only too small to cover the production costs for any existing power plant but will never be able to cover investment and production costs of a new power plant which in this case are estimated to rise above EUR 1 billion.

Find out more

According to Laurentiu Ciurel, at the end of September, a delegation from China Huadian Engineering, the Chinese part of the joint-venture, visited two institutions in Bucharest that could provide some explanations for the strong oscillations of coal energy prices: OPCOM – which manages transactions and contracts on the electricity market, and ANRE – the National Regulatory Authority for Energy. There is no reaction after their visit in Bucharest in Rovinari besides the fact that the steps to create the joint-venture were frozen.

However, Mr. Ciurel does not seem to be bothered by this state of affairs. He stated that the project is still on and he is confident that construction will begin in 2015 and will last for 3-4 years.

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The new 500MW power plant would be inside the current industrial platform that was built in the 1970s and would burn lignite taken from the open cast quarries surrounding Rovinari. The construction itself would be executed by Romanian companies and the investment would be covered by the Chinese. Nevertheless, no financial institution has shown interest in providing the necessary funds yet. The feasibility study is said to have been completed and that the Oltenia Energy Complex is due to get a copy later this month.

Another David vs. Goliath fight in Poland over road construction in Natura 2000 site

In mid-September this year, a Polish NGO called Workshop for All Beings (Stowarzyszenie Pracownia na rzecz wszyskich istot) won another court case against Polish authorities: a court declared that the road construction permit for a section of expressway S7 going through a Natura 2000 site was illegal. This is what Pracownia had been arguing for years.

The S7 is to be one of Poland’s main roads, running from the Baltic Sea in the north to the country’s southern border and connecting Poland’s major cities: Gdansk, Warsaw and Krakow. But, according to Pracownia, a planned section of the road linking the town of Skarzysko-Kamienna and the Swietokrzyskie-Mazowieckie region border is in violation of both national and European law.

The main problems with this particular segment of the road are:

the planned route interrupts a major ecological corridor of European importance on whose continuity depend the lives of many species including the wolf and the moose;
a junction planned in a problematic segment of the expressway just north of Skarżysko-Kamienna would cut into a Natura 2000 site and destruct the habitats of several butterfly species protected under national and European law;
construction of this controversial segment is going ahead despite serious doubts about its necessity and despite an alternative route which would not threaten nature being indicated by Pracownia;
preparation for the construction of this section of the road by the General Directorate for National Roads and Motorways (the promoter, a governmental body) has been advancing despite the environmental and construction permits for the construction being voided by courts and other successful legal actions initiated by Pracownia; the General Directorate is able to get the necessary permits reissued, benefiting from a special feature of Polish legislation, which gives the Polish road law factual precedence over other national regulations.

(Read also this briefing (pdf) detailing the shortcomings of the S-7 expressway.)

This David versus Goliath fight over the S7 is far from over. The court ruling in September did imply that Pracownia was right on the legal arguments, but – in what was quite a surprising formulation of the ruling — stated at the same time that it is up to the authorities to implement the court decision. De facto, this means the national authorities may decide to go ahead with construction despite the road construction permit being declared invalid.

Pracownia, on the other hand, are far from giving up. They have submitted a complaint about the road section to the European Commission in light of the breaches in European legislation. Another expression of concern has been sent to the European Investment Bank, the house bank of the EU, which plans to co-finance this road.

This is an enormous amount of controversy for just 8 kilometers of road. But the impact on nature of this segment could be huge for little or no benefits. It is hard to understand why Polish authorities are pushing for this project when clear alternatives exist. With construction just about to start, it is still not too late for the Polish state to do the right thing. If it insists on this bad project, Poland risks once more turning itself into Europe’s black sheep when it comes to the environment.

Flood impacts kept secret by hydropower plant constructor in Georgia

The Paravani HPP in southern Georgia is about to be completed by constructor Georgian Urban Energy, a subsidiary of the Turkish energy group Anadolu Endüstri Holding A.S. The EBRD has been backing about a quarter of the costs of the USD 160 million project and has an equity share in the construction company. Nevertheless, it does not seem that the constructor is bothered by requirements of and agreements with the EBRD.

A main concern with this project from the start has been the risk of flooding of the nearby village of Khertvisi. The project involves the diversion of 90% of the water from the Paravani river to a powerhouse on the Mktvari River, with the water released some 700m upstream of the village of Khertvisi. Since the village is located on a low level in relation to Mktvari River, villagers fear the worst.

A secret study and consultations that didn’t happen

With the HPP almost close to completion, the truth about the flooding risks and measures needed to limit the potential impact on Khertvisi remains unsettled. The villagers complain that to date they have no information from the company regarding the flooding risks and have not been consulted on the issue.

Following an official complaint by Green Alternative in January 2012 about a range of problems with the project, the EBRD’s internal project complaint mechanism (PCM) confirmed that the bank had violated its Environmental and Social Policy, however not in relation to the potential flooding of the Khertvisi village.

In its final report (pdf) from January this year, the PCM concluded that:

„Monitoring is now complete, disclosure of information has taken place and mitigation discussions have commenced with the affected communities.” (page 29)

However, the latest time indication that can be found in the relevant section of the report refers to 2012:

„The monitoring work […] has continued throughout 2012 and will be presented in its finality to the residents once available.” (page 28)

To date, this has not happened. Being in close contact with the villagers, I know for a fact that they have not been invited to consultations on the flooding risks for the village.

Also a study on flood impacts which the company said it made and which presumably confirms that no protection measures are necessary, remains confidential. In an article in the local newspaper „Samkhretis Karibche” [ge] GUE director Nodar Kurtanidze said (own translation):

„The study which revealed that bank protection measures are not needed is confidential and I do not have the right to disclose it as it has not been ordered by the government but by us. If it were a government order it would be an obligation to disclose it but in this case I do not have right to do it.”

(To explain Kurtanidze’s formulation: even though he is GUE’s director, his authority is very limited since he has to confirm every decisions with GUE’s Turkish parent company Anadolu Endüstri.)

In an astonishing twist of events, GUE did implement flood protection measures in spite of its own study. In the same article as above, the GUE director said that these actions were taken in response to requests by locals. However, the company’s sudden benevolence is highly dubious, considering that the protection measures were implemented not along the village but on the Mtkvari/Paravani confluence downstream of the village. They will be of no use for the village in case of flooding, as Vaja Chikaidze, the head of the Khertvisi village, explained in the same article (own translation):

„It would be better if these works happened upstream of the village, where the village is on a low level in relation to the river and where the cemetery and houses are located.”

Insufficient EBRD follow-up

Despite the EBRD’s satisfaction with its own solution, back in Georgia GUE is far from implementing its agreement with the bank. It is not planning to organise any public consultation nor disclose the study it has presumably made on the flooding risk.

Following a meeting with GUE during a visit to Georgia in September, the EBRD’s environmental advisors have neither confirmed nor denied the situation in their communication with Bankwatch and Green Alternative.

Therefore the question remains when, where and how the ‘effective public consultations’ have happened that are mentioned in the report of the EBRD’s project compliance mechanism.

Who knows, maybe the EBRD believes they have been held in secret as well?

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