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Ukrainian nuclear sector in defiance and in financial trouble

On November 28, the state nuclear regulator of Ukraine (SNRIU) allowed the continued operation of unit 1 of the South Ukrainian nuclear power plant (SUNPP-1) until December 2, 2023 – 10 years beyond its technically designed lifetime. The decision not only constitutes a breach of national regulation, but also disregards an unresolved case of non-compliance with the UN Espoo Convention. All this while Energoatom is in an increasingly tight financial situation.

Breach of national regulation

In December 2012 the nuclear regulator SNRIU had identified 43 obligatory measures required for prolonged operations. However, the latest periodic safety review report of the plant (from October 10) shows that [1]:

  • 38 out of 43 measures have not been completed and for 13 of these neither the status of implementation nor the expected implementation timing has been specified.
  • Most importantly, the number of allowed cycles of “planned cooldowns” at SUNPP-1 has already been exceeded (91 cooldowns vs 90 allowed). Each cooldown results in the wearing off of crucial reactor parts, increasing the risk of cracks in the core reactor, one of few irreplaceable parts.

During the SNRIU board meeting on November 28, Energoatom claimed to have finished all measures in the two months since October, but that the necessary paperwork is simply not yet finalised. Yet, verbal promises by the company cannot be the basis for SNRIU’s decision on the lifetime extension. Without being based on the results of the periodic safety review a positive decision is highly questionable.

Violation of UN rules

Even if all safety measures would be implemented, there is another unresolved problem. Consultations concerning the transboundary impacts of SUNPP-1, a requirement under the UN Espoo Convention, were still not held with Ukraine’s neighbouring countries. Consequently, during the SRNIU board meeting, a representative of the Espoo Implementation Committee pointed out that SRNIU’s decision could create problems for Ukraine.

It wouldn’t be the first time Ukraine’s nuclear sector is in violation of the Espoo convention. In March this year, the Espoo Implementation Committee ruled (pdf) that Ukraine’s decision to extend the licenses of units 1 and 2 at the nuclear power plant in Rivne violated the UN rules since it had been done without an environmental impact assessment and without informing neighbouring countries about the plans, as Espoo procedures would require.

Financial difficulties for Energoatom

A direct financial impact from these unresolved cases on Energoatom’s operations comes via a proposed EUR 300 million loan by EURATOM for the Ukrainian Nuclear Safety Upgrade Programme. The programme includes safety measures at several Ukrainian nuclear power plants, among them also those at the South Ukraine and Rivne power plants.

In a letter to Members of the European Parliament the EU Commissioners Stefan Fule (Enlargement and EU neighbourhood policy) and Guenther Oettinger (Energy) stated that the EURATOM loan will not be disbursed until Ukraine is in compliance with the Espoo and Aarhus conventions. Therefore, until the pending case on Rivne 1 and 2 will not be successfully resolved, the loan will not happen. (An agreement for a loan of the same size by the European Bank for Reconstruction and Development has been approved in March this year but not yet disbursed.)

Losing the EURATOM loan would be a hard blow for Energoatom and Ukraine’s nuclear ambitions generally. After 9 months of 2013 Energoatom had net losses of UAH 4.7 billion (EUR 0.42 billion), UAH 2 billion more than in 2012. Energoatom struggles to find sufficient financing for the Nuclear Safety Upgrade Programme: the needs for 2013 are UAH 3 billion while Energotom only made UAH 517 million from the electricity tariff.

Under such circumstances any financial support is crucial for Energoatom in order to finish the safety measures at SUNPP-1 and to start preparations for the still outstanding upgrades at other plants, starting with ZNPP-1 by the end of 2014.

Notes


1. These and more details can be found in a technical analysis (pdf) commissioned by NECU (National Ecological Centre of Ukraine) to assess whether the technical state of SUNPP-1 is sufficient for safe operations for ten additional years and whether the necessary safety upgrades have been fully implemented. A recent briefing (pdf) summarises the results of the analysis.

UPDATED: Six months and counting… EBRD silent on investigations into its own operations


Update (4.12.2013): In an email, staff of the EBRD’s Project Complaint Mechanism has informed us that internal discussions on the cases described here are ongoing in the EBRD. An indication for when the reports will be published could not be provided.

Today it’s exactly six months since I received a draft of the EBRD Project Complaint Mechanism’s (PCM) findings from its investigation into the Boskov Most hydropower plant in the Mavrovo National Park in Macedonia. Although the report had only to be acknowledged by the EBRD’s board before publication, it has so far been delayed countless times. Two more draft reports on PCM findings on hydropower plant projects were also completed around the same time: one for the 87 MW Paravani derivative hydropower plant in Georgia, approved by the EBRD in July 2011, and one for the 68 MW Ombla underground hydropower plant in Croatia, approved in November 2011.

These three hydro project cases are among the few to be concluded by the PCM in the four years of its existence, and the delay begs the question whether the EBRD takes seriously its commitment to transparency and accountability of its operations? This question is especially relevant as the PCM Rules of Procedure are under revision – an exercise that is hard to conduct without the ability to discuss actual outcomes from PCM investigations.

How sustainable are the EBRD’s hydropower projects?

Hydropower is the renewables favourite that attracts the greatest volume of investments from the EBRD’s Sustainable Energy Initiative outside of the European Union. The three Bankwatch complaints, however, expose the failure of the EBRD to ensure protection of endangered and endemic species, and the need to better balance carbon emission reduction and biodiversity protection objectives.

For example the Boskov Most investigation was the result of a complaint submitted by our organisation, Eko-Svest, in November 2011, when the EBRD approved a loan for the 70 MW Boskov Most hydropower plant, Macedonia. The dam is to be located on the Bistra mountain, the core reproduction area of the critically endangered Balkan lynx, and is one of several hydropower projects threatening the Park. We pointed out that the Bank failed to undertake adequate research before project approval and that it failed to recognise the site as a critical habitat.

The Paravani hydropower plant includes a 14 km derivation tunnel to divert water from the Paravani river to the Mtkvari river upstream of the village of Khertvisi. Our colleagues in Georgia, Green Alternative, submitted a complaint in December 2011 pointing out that in some periods this would leave only 10 percent of water in the Paravani river – inadequate to ensure the survival of downstream flora and fauna – while at the same time, the project creates a significant risk of flooding Khertvisi and the associated transmission lines threaten migratory birds. The bank, it was alleged, had not undertaken sufficient measures to ensure sufficient water levels in the river, and other Georgian hydropower promoters had started to notice and claim that their projects complied with EBRD standards.

The 68 MW Ombla underground hydropower plant near Dubrovnik in Croatia was approved by the EBRD in 2011, on condition that an additional nature impact assessment was carried out. The plant was planned to be built in a future Natura 2000 area that had not been fully researched but was known to contain endemic species. Zelena akcija/Friends of the Earth Croatia submitted a complaint pointing out that the EBRD had failed to ensure adequate environmental assessment prior to project approval and that the project would damage critical habitat without due justification.

Luckily for our colleagues and undeground fauna in Croatia, the Ombla project did not survive long enough to see the outcome from the PCM investigation, but in Macedonia and Georgia, the outcomes of the investigation will have very real impacts. For Boskov Most we are still discussing with the bank the outcomes from biomonitoring that has taken place but come to rather bizarre conclusions, while in Georgia the bank has already thumbed its nose at critics by showing interest in financing the Adjaristsqali hydropower plant, whose environmental impacts are likely to be similar to Paravani, but worse (more to come in the following weeks from our colleagues in Georgia…).

If dealt with in a more timely manner, lessons from these three PCM cases would have served to inform the revision of the Energy Sector Strategy of the Bank that is to be concluded next week. In this process Bankwatch proposed sustainability criteria for hydropower, in order to ensure that the transition to low-carbon economies that the EBRD claims to promote through its investment does not clash with its sustainability mandate and its environmental and social policy.

Is the EBRD delivering on its accountability commitments?

As a multilateral financial institution EBRD is in many ways above the law. Although its clients’ operations are subject to national, EU and international law, the implementation of the bank’s own environmental and social safeguards can only be challenged through the independent reviews of the PCM. If there are barriers to making PCM findings public and thus enabling an open dialogue about the projects’ adherence to the bank’s highly regarded environmental and social standards, then there is a serious problem of accountability.

This is especially problematic as the PCM Rules of Procedure, the bank’s Environmental and Social Policy and Public Information Policy are being revised at the moment, and there is a threat of watering them down instead of strengthening them. So no wonder we are concerned. What exactly delays the disclosure of the PCM findings? In whose interest is it to make the PCM process slow and ineffective? Will the PCM be given the chance to perform its functions and ensure that the EBRD is accountable and can handle independent assessment on how well it complies withs its policies?

It is high time for the Boskov Most, Paravani and Ombla reviews to be made public and for the EBRD to affirm its commitments to transparency and accountability.

EBRD soldiering on in Egypt


The US government may have decided in early October to suspend – at least temporarily, and following the ousting of President Mohammed Morsi in July and the subsequent crackdown on his supporters by the Egyptian military – much of the USD 1.3 billion in military aid it provides to Egypt, yet the European Bank for Reconstruction and Development (EBRD) swiftly confirmed that it is sticking to its course in the troubled north African state.

Speaking to the Wall Street Journal during October’s World Bank/IMF meetings, EBRD president Sir Suma Chakrabarti made clear that EBRD shareholders, including the US itself, had no plans to pull the bank out of Egypt in spite of the recent further instability there.

“It’s not business as usual as if nothing’s changed, because clearly our major shareholders are thinking about this issue, but at the same time nor is it ‘stop doing what you are doing,'” commented Chakrabarti, while talking up the country’s investment potential.

According to the Wall Street Journal,

“Mr Chakrabarti said both Eastern Europe and North Africa would attract greater investment if they made further reforms to liberalize their economies, including privatizing state-owned assets.”

Speaking to Bankwatch, however, Adam Hanieh from the Department of Development Studies at SOAS in London and author of the recently published ‘Lineages of Revolt: Issues of Contemporary Capitalism in the Middle East‘, takes issue with such prescriptions.

“Despite claims to the contrary,” Hanieh points out, “the EBRD’s explicit perspective on privatization and liberalization confirms that there has been no major shift from ‘the business as usual’ attitudes of the major international financial institutions. These policies have wrought enormous damage on the vast majority of the Egyptian population, and they will undoubtedly continue to do so. There can be no real way forward that satisfies the needs of the poor until the country breaks substantively with the neoliberal trajectories of past regimes.”

Even before the events of July, involving hundreds of deaths and more bloodshed across Egypt, a report from the European Court of Auditors identified the failure of one billion euros of EU aid to do much for post-2011 ‘Arab Spring’ Egypt, and certainly not the enduring, precarious human rights situation.

Moreover, as part of a recently convened United Nations consultation to gather critical analysis from civil society on the UN’s post-2015 development agenda (pdf), Arab civil society networks have made it plain that the post-2015 agenda “should constitute a major departure from the prevailing development model pursued in the region over the last three decades.”

According to submissions provided to the UN consultation, and sharply critical of the “policy package of [international financial institutions, such as the World Bank and the IMF] involving typically liberalization, deregulation and privatization, export- and foreign investment-led growth”, Arab civil society participants to the consultation maintained (pdf)that

“people in the Arab region were motivated to take to the streets not only by the undemocratic and corrupt nature of the regimes in place, but also by the sense of social exclusion and exploitation resulting from the development policy orientation that had been pursued under these regimes – often at the instigation of external partners, including international financial institutions.”

EBRD added value?

If you’re wondering exactly what the EBRD has to offer Egypt – and, indeed, more generally its other countries of operations – the publication also in October of Publish What You Fund’s 2013 Aid Transparency Index confirmed more worrying EBRD trends.


The EBRD has been ranked among the worst for its transparency performance. (Click image to see in full size.)

In its assessment of the transparency of multilateral institutions, Publish What You Fund was condemnatory of the EBRD:

“Multilaterals as a group do well in the Index, with 13 of the 17 placed in the very good, good or fair categories. The average overall score for multilaterals (53%) is significantly higher than the overall Index average (33%). […] The EBRD is the lowest ranking multilateral, scoring only 24.5%, reflecting the lack of comprehensiveness in the publication of organisation and activity-level data. The EBRD is the only multilateral agency that does not publish any information systematically in machine-readable formats.”

Significantly, bearing in mind the bank’s aspirations and new role in north Africa, when it comes to transparency – surely a hugely important concept in Egypt right now, given the prevailing circumstances – the EBRD is lagging far behind the African Development Bank’s 63.7 percent in Publish What You Fund’s ‘good’ category, raising doubts about the standards the EBRD is bringing to the north African region.

Love us – we have taxpayers’ money at our disposal

But the EBRD has money. Quite a lot of it. Mostly our money. And thus is in demand, if a recent Tweet from Sir Suma is anything to go by.

Greece, Portugal and Cyprus, if the Tweet is not just a piece of vanity micro-blogging, may now be on the EBRD’s radar. It’s certainly an interesting prospect for a bank set up – specifically – to assist post-communist states adjust to and ‘get with’ market discipline, to now be considered as a panacea for countries that have been so ravaged by market disciplinarians.

With unemployment levels spiking in eastern Europe some 24 years after the fall of the Berlin Wall, it is surely highly inappropriate to call on the same doctor to administer the same tonics in north Africa and – maybe now – southern Europe that have kept so many eastern European economies in critical condition (pdf).

Guest post: End to UK coal investments overseas welcome – but it must include Kosovo


This article first appeared on KOSID’s blog and has been reposted here with kind permission by the author.

Amid the frustrating news coming out of this week’s climate summit in Warsaw it’s refreshing to see that the UK government has finally come out with a clear statement on its intention to halt investments in coal overseas, joining the US and Nordic countries who expressed similar commitments in September this year as a step in fighting climate change.

Nevertheless, as our enthusiasm about the US’s announcement was tempered by indications that it may still make an exception for the planned Kosova e Re power plant, we would urge the UK to make a public commitment that it will not support this project.

Read more

Background information and more news on the Kosova e Re lignite power plant

Kosova e Re does not fulfill any of the criteria, which outline the conditions for a country to be considered as an exception rare case. Kosovo is not one of the world’s poorest countries, not all the alternatives have been exhausted, and it is unlikely that Best Available Techniques will be used.

This should be taken seriously by the UK government, when considering decisions of the World Bank and EBRD on whether to invest in a 600 MW coal-fired power plant in Kosovo. Kosovo is currently producing 98% of its electricity from lignite, and only 2% comes from a small hydro plant. With a high level of technical and commercial losses which reach about 40% of the total production, investment in large, inflexible generation capacities is not necessary. Energy efficiency must be the first step to be implemented.

The EU countries should help Kosovo reach its targets on renewable energy capacities (25% by 2020), which are freely available and would diversify the energy mix in the country. This would contribute to the EU’s policy of de-carbonization of the energy sector and join other countries in fighting climate change.

Bankwatch joins NGO boycott of COP19

Today, Bankwatch joined other organisations walking out of Warsaw Climate Conference. Under the Polish government’s leadership the talks have utterly failed to address the urgency of the situation. Targets have been unambitious, the interests of the fossil fuel industry have been allowed to dominate the discussions, and there is no new financing on the table for climate mitigation and adaptation. This conference has lost credibility in the fight against climate change.

PPPs a threat to national security, says Czech national security service BIS


Of all the institutions I never thought would be an ally in the battle to ensure wise use of public funds, the Czech national security service BIS has to be pretty high up the list. Yet the very same BIS, in its annual report (pdf) on its activities in 2012, casts its net wider than usual and characterised “the disfunction of the state authorities” and “the operation of regional clientelistic structures” as “two main aspects of organised crime in the Czech Republic”.

Under the heading of ‘Organized crime’, among other issues BIS examined public-private partnerships and

“reached the conclusion that the concept of PPP in its current form, though promoted as an advantageous alternative for public service provision, does not provide a reliable basis for advancing public interests.”

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.

Read more

The report makes a range of interesting points:

  • Managing PPP projects through hiring external consultants – necessary because of the complicated nature of PPPs and low capacity in public authorities – is expensive and ineffective.
  • It means that those assessing the projects do not necessarily have the public interest at heart and in BIS’s opinion this has contributed to the failure of PPPs in the Czech Republic.
  • BIS also considers the hiring of external consultants a kind of failure of civil servants to take responsibility for the decisions they make, but also says that staffing has not been improved in a way that would allow capacity for project assessment to be built internally.
  • Public budgets can be siphoned off of PPP projects in a manner similar to that observed in EU funds. But with PPPs the danger is greater since it involves long-term contracts and hidden future debts.

BIS singles out Plzen’s ‘partnership’ with companies linked to Škoda Transportation, a.s., in building a new public transport depot for the Pilsen City Transport Company and servicing its vehicles. This project, worth around EUR 450 million, and lasting 29 years, is said to exceed other comparable projects in cost, duration and the degree of risks. Since the start the project has been plagued by doubts about its value for money for the city of Plzen, and in 2012 Transparency International asked the Czech Competition Authority to investigate the deal (pdf).

So what now for the numerous institutions including the European Commission, the European Investment Bank and the European Bank for Reconstruction and Development who continue to foist PPPs on any country that cares to listen? Even if they didn’t mind promoting PPPs when they were ‘just’ poor value for money generators of hidden debt, do they not mind now that they are promoting organised crime?