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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. 

EIB’s lack of public disclosure on the Svans challenged by Ombudsman

In its recent opinion on a case brought by Bankwatch, the European Ombudsman criticized the European Investment Bank (EIB) for not disclosing the expert opinion that Bankwatch requested. The Ombudsman found that the EIB’s reasons for withholding the report were unfounded. We welcome this opinion of the European Ombudsman, who has again stood on the side of citizens’ right to know about the EU institution’s activities

It was at a meeting with Bankwatch and Svan community representatives in early 2018 when the EIB’s staff explained that the Bank had an independent opinion confirming that the Svans did not qualify as indigenous peoples under the Bank’s standards.

Svans are an ethnic group in Georgia, constituting approximately one per cent of the Georgian population, with their own distinct cultural and religious traditions, as well as a unique language and law. They live in high mountains, in a region called Svaneti. 

Now, the region is facing a massive programme of hydropower development, including five large reservoir and dam projects. The EIB agreed to finance the largest of them, the Nenskra hydropower plant, which is expected to significantly impact the life of people in Upper Svaneti. These developments seriously threaten the Svans’ culture and traditions, and the livelihood of many.

When we questioned the EIB’s decision not to trigger a policy provision that would protect the Svans and requested disclosure of the expert analysis on which the Bank’s decision was based, we first received a document for the purpose of disclosure which was not an expert assessment but the EIB’s own conclusion. Then, when we insisted that the Bank disclose the real document and complained to its Complaints Mechanism, the Bank began claiming that the document’s disclosure would seriously undermine its decision-making process and would undermine the protection of the public interest as regards international relations.

However, the European Ombudsman found that the requested document largely contained information of a historical, geographical or anthropological nature which was not likely to harm the EIB’s decision-making process, international relations or the privacy and integrity of the author of the report. It proposed that the EIB disclose these data.

It is indeed incomprehensible why the Bank tried to hide a document which turned out to include a brief history of the Svans, information on their language and answers to some questions from the lenders’ guidelines (Asian Development Bank, European Bank for Reconstruction and Development and EIB) on indigenous peoples. It also turned out that the document was not drafted by an independent expert as claimed by the EIB during the meeting, but by the project promoter’s expert. 

The EIB did not want to reveal that its decision not to properly protect the Svans against the negative impacts of this megaproject was based on political grounds and had nothing to do with an objective, prudent assessment or a precautionary approach – both of which are widely expected from the EU institution.  

Give women a voice to build better cities

Just look at the traffic signs in many parts of the world! More often than not, traffic signs show men: men crossing the road, male pedestrians to watch out for, and men doing construction work. You would think the world has only one gender. Traffic signs may not seem like a serious gender equality issue, but they undoubtedly create unconscious bias and reflect the way our infrastructure has been built – by men, for men.  

Building sustainable cities means providing opportunities for all. This is impossible without considering the gender implications of urban infrastructure. The UN Sustainable Development Goals (SDGs) include both sustainable cities (SDG 11) and gender equality (SDG 5). These should go hand in hand in order to meaningfully contribute to sustainable development. 

So, what are the main issues women face with regard to city infrastructure? 

Let’s start with transportation, the ‘circulatory system’ of any city or settlement. Women need to have equal mobility in order to have equal access to educational opportunities and economic participation outside of the home. Unfortunately, women often face long commutes to work or school, which is likely to keep them at home and prevent them from taking an active part in society. There is a negative correlation between commuting time and women’s labour participation. 

According to research conducted by Stanford University, U.S. women across all racial and ethnic groups use public transport more often than men. Therefore, in order to ensure women can commute safely, comfortably and affordably, it is crucial to ensure that public transport is accessible for women. 

Zero-carbon public transport is important not only because it facilitates gender equality, but also because it is the most environmentally and socially sustainable solution for mobility within cities. However, one of the biggest challenges for women using public transport is security. 28% of women who use public transport in London, 45% of women in Tbilisi, Georgia, and around 60% of those in Latin America reported verbal or physical harassment in public transport. Thus, in order to ensure women can access this inexpensive and environmentally-friendly urban service, cities have to make sure public transport is safe for women. 

Another big infrastructure issue for women is water and hygiene. Women are more likely than men to suffer from the lack of clean water and sanitation facilities. Lack of sanitation can discourage women from engaging in economic activity outside the home due to menstruation and related social stigma. However, these and household related reasons also mean that women more often take responsibility for providing water for their family. For example, women in developing countries are proactively involved in building connections to clean water in their households and cities.

Women’s voices are crucial in designing sustainable solutions for cities that protect our environment and communities, and increase the quality of life. In Nordic countries, accessibility and inclusivity of infrastructure is a key part of urban planning. Renewable energy sources are no longer a luxury, but a standard. Unsurprisingly, these cities and countries have the highest number of women in policy making and leadership positions. 

However, the picture is not as bright in the rest of the world. According to the Global Gender Gap Report 2020, only one in five ministers globally are women. This proportion is the same in infrastructure ministries, where one in five employees are women. 

If we want women’s voices to shape sustainable infrastructure, we should have more women in decision-making roles, especially in infrastructure. The cities of Vienna and Barcelona are good examples. Vienna now hires more women architects and city planners than it did in the past. They have increased security by adding more city lights, and encouraged girls to use parks by introducing special sport facilities for girls, and designing park spaces to make girls feel more comfortable using them. Barcelona, led by a female mayor, radically increased safety in recent years by improving lighting and effectively combating street harassment.  

In addition to more female policy makers and decision makers, we also need more women represented in infrastructure, architecture and urban design. This requires removing gender stereotypes and unconscious gender biases that prevent women from entering and succeeding in these fields. 

Women should have a voice as public service users and citizens as well. Women and gender organisations need to be consulted in designing and implementing sustainable solutions, as their experiences and views can inform a practical and user-friendly urban infrastructure and services. 20th century cities were accessible primarily for adult, able-bodied males, but the city in the 21st century should be accessible for all!

Bankwatch’s new set of infographics in four languages shows how sustainable, inclusive city infrastructure can be designed. We suggest greater participation of all community groups, including women, in shaping their shared space.

Latvia supports climate neutrality by 2050 as long as EU budget follows suit

On 2 September, Latvia’s European Affairs Committee adopted a position in support of theEuropean Climate Law, anchoring its climate politics among those member states united in recognition of the need for more ambitious decarbonisation policies. This was the final decision before the European Parliament reviews a legislative proposal to set EU-wide targets leading to climate neutrality in 2050, as per the  European Commission’s proposal of March 2020.

Juris Pūce, Minister of Environmental Protection and Regional Development

While there is broad political support for an EU-wide target, there is much less agreement on obligations of different sectors towards net-zero emissions, and how individual contributions will reach beyond local climate change mitigation measures to address the global CO2 budget where Latvia has a tiny, nevertheless a crucial, share.

Later this autumn, the Commission will publish a proposal on increased GHG reduction targets for 2030. A core demand of Latvia’s decision makers is a cross-sectoral economic impact assessment. Their foremost concern is how the EU budget and the allocation of additional funding of other non-climate priorities fits in the picture. Second, the shift towards a low-carbon economy will be tolerated in as far it promises economic growth and business opportunities. Third, flexibility and compensation measures will further increase pressure on land management to secure carbon sinks in natural ecosystems.

Latvia’s National Long-Term Strategy and National Energy and Climate Plan were adopted in January 2020. While the plans for the next decade are detailed, the longer timeframe of 30 years remains abstract and lacks a strategic approach. Since August, the draft Operational Programme for the EU Funds 2021-2027 is open for public consultation. The plans for Recovery & Resilience facility and Just Transition are still in the making. 

The next decade is crucial to invest in climate action and start decarbonising every European Member State, and these funds account for most of the EU financial support to Latvia in the upcoming seven years. If planned and implemented correctly, they have the potential to support and materialise Latvia’s shift to an ambitious decarbonisation pathway leading to carbon neutrality by 2050.

No proper benchmark for checking European Export Credit Agencies’ compliance with EU objectives

Every year ECAs channel around USD 200 billion in public money to projects.  Some of these projects, are in stark contrast with the global effort to tackle the climate crisis, such as a coal power plant in Bangladesh, oil power plants in Cuba or an LNG project in Mozambique. Other projects contribute to human rights violations. For example, the investor behind the Olkaria I and IV geothermal power plant in Kenya supported by French and German ECAs and other multilateral financiers, ignored the Indigenous People status of impacted Masaai communities. In other cases, ECAs back projects in Indonesia’s coal sector, where companies have allegedly been moving millions of dollars offshore. As part of Bankwatch’s effort to enhance the reporting requirements of European ECAs under EU law, we have been in dialogue with the European Commission about making these public institutions as accountable as they should be. But the EU’s executive body appears to be satisfied with the status quo. “Member States should comply with the Union’s general provisions on external action, such as consolidating democracy, respect for human rights and policy coherence for development, and the fight against climate change, when establishing, developing and implementing their national export credit systems and when carrying out their supervision of officially supported export credit activities,” says an EU regulation, in force since 2011. To put this into practice, the European Commission produces an annual evaluation of the compliance of EU ECAs with the Union’s objectives and obligations. Specifically, the Commission’s monitoring is intended to check whether projects supported by ECAs are consistent with the “external action” objectives set out in Articles 3 and 21 of the Treaty of the European Union. These objectives promote, inter alia, the consolidation of democracy, respect for human rights, policy coherence for development and action against climate change. To check that, the European Commission has been accepting the Common Approaches as a benchmark for years. What’s even more striking, the checklist filled in by EU Member States is an outdated box-ticking exercise. For example, it doesn’t contain any questions related to climate action or the implementation of the Paris Agreement. ECAs, as public finance institutions, should be aligned with their governments’ climate change mitigation commitments, including the Paris Agreement. Meanwhile, European ECAs differ significantly when it comes to climate action commitments. The unique example of any action undertaken is the Swedish export credit agency EKN, which starting 2021 will no longer issue new guarantees for the financing of exports to coal mining. Dutch Atradius, in its 2017 Annual Report, stated its general intention to mobilize capital and finance for climate projects, thereby contributing to the Netherlands’ efforts to combat climate change under the Paris Agreement. But there are also many other export credit agencies, which don’t exclude projects related to the extraction and combustion of gas, crude oil, hard coal or lignite. Thus, a clear benchmark showing this and other EU objectives to be shaped by the European Commission is even more needed. In 2018, the European Ombudsman had called for improving the methodology and procedures used by the Commission to evaluate the annual reports it receives from Member States. In response, the Commission has started a revision of the checklist template used by Member States for their annual reports, which is ongoing. The problem is, this revision exercise is not even informed by any gap analysis of the Common Approaches vis-a-vis the European Aquis. The Commission should provide such gap analysis and employ EU standards as the benchmark for evaluating the compliance of member state ECAs with the EU’s external action obligations. Not to do so would, in our view, constitute maladministration.

As tensions reach a tipping point at Amulsar gold mine, what next for the EBRD?

The heavy-handed eviction during the night of 4 August of a caravan posted at the entrance to the mine was the culmination of developments following mine operator Lydian’s decision to change security firms at the beginning of July. Police later removed the security presence, confirming that the protesters’ caravan was not illegally encroaching on Lydian’s territory.

But the first signs of trouble appeared on 1 July, when Special Security Forces employees moved on protestors, in spite of promises made the day before to not carry weapons, remain explicitly at the project site alone and employ only the number of guards required for one shift. 

Significant numbers of police officers were on hand to prevent physical confrontations between protesters and the security personnel, while activists from Yerevan and around Armenia rushed to Jermuk in support of the demonstrations.

Photo: Sona Margaryan

Where is the EBRD?

Against this backdrop, the accountability mechanism at the European Bank for Reconstruction and Development, which provided Lydian with EUR 11 million in 2017 and 2009, conducted an assessment into a complaint submitted by 23 locals to the bank. On 7 August the Independent Project Accountability Mechanism (IPAM) published a report that acknowledged that complaint had merit and warranted further investigation into whether the bank violated its policies on environment, social and human rights protections in funding Amulsar.

While IPAM deeming the complaint eligible was no surprise, given Lydian’s less-than-stellar track record, it was a surprise to find buried in the report a mention that the bank’s investment will be ‘terminated’ as part of Lydian’s corporate restructuring process. (Lydian filed earlier this year for bankruptcy protection in a Canadian court after being delisted from the Toronto stock exchange.)

Media then reported the company’s response to the public announcement of the EBRD exit, “Lydian will also continue to discuss the scope of further cooperation with the EBRD on the Amulsar project”. This reflects information received by Bankwatch from an EBRD representative in March this year that the project will need another financial injection, if the blockade will be lifted and the project restarts.

However any further cooperation between Lydian and the EBRD would require new assessments of the financial, reputational and compliance risks of such a new investment in the Amulsar project. As such, the IPAM review of the project’s compliance with the EBRD’s environmental and social standards could not have come at a better moment. EBRD decision-makers need to hear an independent view on what went right and what went wrong with the Amulsar project, so that the bank would be wiser the next time it approaches such a risky investment with a contested licence to operate.