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Juncker’s investment package to be hijacked by countries’ destructive plans

Brussels – A list of projects member states want to see financed from the Juncker investment package has been made public in expectation of tomorrow’s summit where finance ministers will discuss the package. Coal, nuclear and incinerators are among the various countries’ priorities, which fail to add up to the long-term strategic plan to stimulate growth and sustainability in Europe that Juncker promised.

“Scary is the first word that came to my mind as I looked at the list of projects proposed by the various member states to be financed from Juncker’s billions,” comments Bankwatch’s Markus Trilling. “There is a huge amount of coal being proposed by the various countries, including Poland, Croatia and Romania, and this is in full contradiction not only to EU goals but also to Juncker’s rhetoric on sustainability.”

“Poland is proposing a big number of coal plants, including Gubin, Laziska, Blachownia and Kozienice, and it also put forward the expansion of lignite mines at Gubin,” notes Trilling. “But this is ridiculous in the context of a growth package. Polish state owned mines have been systematically losing money and burdening the Polish economy and a new mine is only going to make things worse. Perhaps now that former Prime Minister Donald Tusk has moved to Brussels to become Council President, he might be more inclined to see Poland’s ambitions as they really are: self-deluded and destructive.”

Projects included on the priority list to be financed from Juncker’s package are supposed to be economically viable, but the example of the Polish mines proves that countries have not necessarily adhered to this condition and that further screening is crucial.

While there are some laudable projects on some of the countries’ lists – notably, Lithuania’s plans to invest 7.2 billion euros in household energy efficiency – these get completely crowded out by the numerous projects which would have a damaging impact on Europe’s environment, economy and financial stability if implemented.

“This list of projects gives us a startling view of what most EU countries plan to focus on in the near future: fossil fuel reliance in the energy sector, large-scale infrastructure, expansion of risky public private partnership schemes (PPP) to sectors like health and education,” comments Counter Balance’s Xavier Sol. “Such projects are not putting Europe on a sustainable growth path but rather they are increasing Europe’s vulnerability while passing the risks onto taxpayers.”

Bankwatch and Counter Balance express concern about how the priority projects list was put together by the mandated so-called “task force” made up for member states, the European Commission and the European Investment Bank. According to the NGOs, the selection process has lacked transparency and it has involved disproportionately more representatives of the business sector than any other type of participants.

The list of projects is to be further discussed – and reduced – by the European Council, Commission and the European Investment Bank and no final decisions have been made yet. The European Parliament too will play a role in the approval of the investment package, though it is unclear yet what impact it can have on the actual list.

“The European Commission and the European Investment Bank proved that they can act fast with this package but now they have to prove they can also act responsibly,” says Sol. “As guarantors of the good use of public funds, the EC and the EIB have to help Europeans escape this madness of bad and dirty infrastructure and make sure transformative sectors such as energy efficiency and renewables get priority over fossil fuels. The EU institutions have to check properly every single project and make sure the public has a chance to comment on the list of projects that will get priority financing.”

For more information, contact:

Markus Trilling, Bankwatch
markus.trilling@bankwatch.org
+32 484 056 636

Xavier Sol, Counter Balance
xavier.sol@bankwatch.org
+32473223893

Boskov Most suspected of breaching Council of Europe nature protection convention

Skopje/ Strasbourg – The Standing Committee of the Bern Convention, a binding international legal instrument in the field of nature conservation for signatory countries, announced today (pdf) that it will open a case file to address the complaint made by Eko-svest about the planned hydropower plants in Mavrovo national park.

The complaint alleges that Macedonia is not complying with several articles (2, 4, 5 and 6) of the Convention and that the country did not make the necessary efforts to protect wild flora and fauna in the Mavrovo protected area when it decided to construct 18 hydro power projects on the territory of the park.

One of the largest projects planned, the Boskov Most HPP project, involves the construction of a 68 MW hydropower plant including an accumulation dam of 33 meters. The construction would seriously jeopardise the small population of Balkan lynxes living in the region, a species on the verge of disappearance, out of which around 40 specimens still survive in Macedonia today.

“The Bern convention Standing Committee found our claims that the Balkan lynx would be close to extinction in case the Boskov Most and other hydro projects are finalised very persuasive,” explains Ana Colovic Lesoska, Bankwatch campaigner in Macedonia. “The Committee said it would look into the case and carry out an on the spot appraisal to establish the level of threat to biodiversity posed by this project.”

The Boskov Most project has been marred with controversy in addition to the biodiversity concerns. It has been advancing without a proper comprehensive environmental impact assessment, which is problematic in itself but also from the point of view of breaching the standards of the European Bank of Reconstruction and Development, which committed to a loan for the project. Moreover, recent evidence raises serious doubts about the economic viability of the project. To date, no transmission line that could connect the dam to the grid has been planned for, and the EBRD is yet to initiate an economic feasibility study for the project. Finally, even the environmental permit on the basis of which works would be started, as incomplete as it was, has expired.

“This sudden attention from the Bern Convention Standing Committee should make it clear to our authorities that this project cannot go ahead like this, with so many aspects of it being problematic,” says Ana Colovic Lesoska. “And the EBRD, as a responsible public institution accountable to taxpayers in the EU and elsewhere, should step out of this project at least until all the doubts related to it are cleared.”

After the on the spot appraisal, the expert appointed to conduct it will draw recommendations to be met by Macedonia. If the country complies with the recommendations and shows good faith in collaboration, the case will be closed. If Macedonia does not comply, the case will remain open and the Standing Committee could recommend other means to mediate the problematic situation. In any case, the attention of the Council of Europe on these issues has historically brought about dramatic changes to initial governmental plans in other countries, so similar effects can be expected in Macedonia.

For more information, contact:

Ana Colovic, Eko-svest and Bankwatch
ana@bankwatch.org
Tel.: +38972 72 61 04

Read more about the Bern Convention:
http://www.coe.int/t/dg4/cultureheritage/nature/bern/default_en.asp

And about Boskov Most:
https://bankwatch.org/publications/boskov-most-hydropower-plant-macedonia

European Commission opens infringement procedure against Romania over coal mine

Bucharest — The European Commission has opened an infringement case against Romania regarding the lignite quarry extension at the Rovinari complex in Gorj County. The Commission suspects Romania of not complying with the EU Directive concerning the environmental impact assessment of projects.

“The Romanian authorities have tried to ignore the impact of wiping off the face of the earth of 700 hectares of forests as well as the impact of the lignite mines operations on both the lives and the health of the people living in the surrounding communities and on the environment,” says lawyer Cătălina Rădulescu from Bankwatch Romania.

“But the Commission made the right decision,” adds Rădulescu. “This is a very big signal for the Romanian government that all the mining projects planned in the Rovinari area cannot just happen without an assessment of their environmental and social impact. We hope that the European Commission’s action together with previous decisions of Romanian national courts, which similarly challenge the legality of expanding mines without proper permits, will force the Oltenia Energy Complex, the Ministry of Environment and Climate Change, and the Gorj County Environmental Protection Agency to abide the law.”

The mines in question serve the Oltenia Energy Complex, the largest coal electricity producer in Romania. The 700 hectare extension of the quarries is taking place without the proper environmental permits. Some environmental permits have been issued, but only for the deforestation of this surface. Importantly, no assessment of the cumulative impact of the mines expansion has been conducted and no adequate evaluation of the impact on the protected areas neighbouring this perimeter has been completed either. The permitting procedure also failed to ensure the participation of the concerned public.

The infringement case, whose opening was confirmed December 3 by the European Commission, was caused by a suspicion of non-compliance with the Directive 2011/92/EU concerning the assessment of the effects of certain public and private projects on the environment (the so-called EIA Directive).

In July this year one of the environmental permits issued for the deforestation of 59 hectares of land was annulled by the Administrative Court in Bucharest. More court cases are pending concerning other forest perimeters.

“Forests have a great contribution to air pollution reduction, they stabilise the land and are important CO2 sinks,” says Ionut Cepraga, campaigns coordinator for Greenpeace Romania. “From this perspective, to cut down forests in order to make room for more coal burning is irresponsible, especially considering that coal is the dirtiest of fossil fuels.

“The decision of the European Commission is just another confirmation that the Oltenia Energy Complex, with the support of authorities in Romania, is trying to bypass current laws,” adds Cepraga.

Notes for the editors:

The infringement case was opened on November 27, 2014 under the reference number 2014/4239.

The letter from the European Commission confirming the start of the infringement procedure is available for download:
https://bankwatch.org/documents/EC-letter-infringement-Rovinari-03Dec2014.pdf

Read more about Rovinari:
https://bankwatch.org/news-media/blog/forests-sitting-lignite-saved-romania

For more details, please contact:

Ionut Cepraga, campaigns coordinator for Greenpeace Romania
ionut.cepraga@greenpeace.org
Tel.: 0724302487

Cătălina Rădulescu, Bankwatch Romania Association member
catalina.radulescu@gmail.com
Tel.: 0745138165

Image by Mihai Stoica

NECU and Bankwatch statement on the incident at Zaporizhye nuclear plant in Ukraine


“The incident at the Zaporizhye nuclear power plant in Ukraine, where a power transformer dysfunction occurred on November 28th, is considered to be routine by the Ukrainian nuclear industry. The same unit’s operation was stopped by the automatic safety system in June 2014, following a pump dysfunction.

“Zaporizhye is one of the 15 currently operating Ukrainian nuclear reactors, 12 of which were supposed to be closed over this decade because they reached the end of their design lifetime. Successive Ukrainian governments, however, prefer to keep the units in operation. There is no clear action plan for decommissioning nor ideas for the capacity replacement as nuclear produces almost half of country’s electricity.

“The current conflict with Russia has exposed problems of the Ukrainian nuclear sector. Ukraine is heavily reliant on Russia for nuclear fuel (which is very difficult to replace by another producer), spare parts and technical documentation. This opens space for a conflict similar to the ‘natural gas wars’ the two countries have been engaged in for years now.

“The recent accident has also demonstrated another problem that reliance on nuclear causes to the energy sector – the concentration of the generating capacities. The incident that stopped one 1000 MW unit has created an unbalance in the energy sector that led to rolling blackouts, leaving the country hungry for gas and coal to compensate for the lost generation capacity.

“While many experts insist on the need to restructure the energy sector by cutting consumption and kick-starting the development of renewable as the best ways to achieve energy independence, the European Union — through European Bank for Reconstruction and Development (EBRD) and Euroatom loans — financially supports the programme to extend the lifetime of the Soviet-built reactors. In this way, Europe will get no more than a higher risk of major nuclear accidents and further dependence of the Ukrainian energy sector on Russia.”

Olexi Pasyuk
Bankwatch Ukraine
NECU (National Ecological Center of Ukraine)

Sostanj lignite plant: A mistake not to be repeated

Ljubljana — A new briefing by Slovenian NGO Focus shows how misguided assessments of future viability and corruption led to TES6 lignite unit costing more than double the estimated amount, bringing annual losses of tens of millions of euros, and creating only a fraction of the number of jobs promised.

The briefing is available for download here:
http://www.focus.si/files/programi/energija/2014/mythbuster.pdf

A short version in English can be downloaded here:
http://www.focus.si/files/programi/energija/2014/myth_buster_short.pdf

The 600 MW new unit at Sostanj in northern Slovenia is meant to replace five expiring units in the same complex and be functional for 40 years. When the project emerged, the unit was estimated to cost 602 million euros, create 3,500 jobs and generate a profit.

In reality, the unit which is now already constructed, has reached a price tag of 1.43 billion euros, employs around 450 people (half of whom are expected to be fired in the near future because of the poor economics of the plant), and will, if the sales prices of electricity remain at the current level, produce annual losses of around 70-80 million euros.

“There is no other way to describe this project except catastrophic,” comments Focus’s Lidija Zivcic who has for years campaigned against the new unit. “Our authorities supported this project despite numerous warning signs such as an official corruption investigations, expert reports showing the plant is not economically viable and opposition from some of our politicians.

“And now it turns out it is us Slovenians who have to cover the costs. Literally, since the government is trying to soon introduce a special ‘contribution for TES6’ together with our normal electricity bills to cover the losses. It should not be the citizens who will pay with their money and health for the colossal mistakes in this project.”

According to the Focus briefing, which refers to contents of an ongoing police investigation, the whopping increase in the costs of construction has as one of main causes unduly gains of around 285 million euros made by main constructor, French Alstom. Earlier this year, Slovenian police announced that ten people had been charged with fraud in relation to the illegal gains made by Alstom.

In addition to corruption, another reason for the terrible economics of Sostanj is simply reckless economic sensitivity analysis on the part of the Slovenian project promoter TEŠ and authorities who should have checked TEŠ’s estimates. The economic viability of the project was calculated with the assumption of high electricity prices but these are currently very low and are likely to stay this way until at least 2020. If it operates at full capacity, TEŠ 6 will generate annual losses of 70-80 million euros, which in the end will have to be supported by the state budget since HSE, the owner of TEŠ, is a public company.

The new Slovenian Prime Minister has asked the Ministry of Finance and Ministry of Justice to study whether it would be possible to prepare a law on auditing the TEŠ6 project. The audit would establish the basis for prosecuting the ones that are responsible for the catastrophic picture of this project.

For more information, contact:

Lidija Zivcic, Focus Slovenia
lidija@focus.si

Pippa Gallop, CEE Bankwatch Network
pippa.gallop@bankwatch.org

Juncker investment package shifts risk from private investors to EU taxpayers


InvestEU programme endorses unfair risk-reward balance
Risky projects may threaten economic development instead of driving it

Brussels – Today European Commission president Jean-Claude Juncker will present his widely anticipated 300 billion euro investment package aimed at stimulating growth in the European economy. Central to the InvestEU programme is a 21 billion euro allocation for the newly-created Euopean Fund for Strategic Investment (EFSI) that has to leverage 315 billion euro from private investors, or 15 times the amount of the fund.

In the run up to today’s announcement, President Juncker’s growth plan has attracted widespread scepticism from analysts who doubt it can address Europe’s post-crisis investment woes. Big investment talk based on a leverage ratio of 15 to 1 is optimistic to say the least, if not irresponsible.

Against this backdrop, the European Commission’s passive approach to economic recovery is concerning. In order to attract private investors the fund will only be used to ‘de-risk’ investments in risky projects that face difficulties attracting capital.

De-risking does not mean risk disappears, but rather that risk is passed on to public institutions and EU taxpayers.

“What looks at first sight like a big, new silver bullet to finance large infrastructure projects could very easily end up having a devastating effect on Member State budgets and the economy if the projects fail,” said Xavier Sol, Counter Balance director. “Instead of blindly cheering a new source of cheap money we should be a bit more careful in assessing the solidity of this scheme and the clear risks that accompany it.”

The details of the financial instruments required to realise the European Commission’s latest investment ambitions have not yet been made public but they are expected to include the provision of high-risk capital for infrastructure projects in order to attract private financing, similar to the EU’s Project Bonds Initiative (PBI). Launched in recent years by the European Commission and the European Investment Bank (EIB), PBI is being used to refinance risky infrastructure projects via capital markets. The EIB’s role is to de-risk these projects by upgrading their credit rating and taking the first losses if needed.

The Castor gas storage facility in Spain, the first project to be financed via the PBI, has already proved to be disastrous, and instead of spurring growth, the controversial project has placed an additional debt burden on the Spanish economy. Ultimately this debt will be passed on to Spanish citizens who will be repaying bondholders over the next 20 years through increased gas bills.

Xavier Sol: “The EU debt crisis was the consequence of an unfair risk-reward balance. Big banks took the profit while the risks were borne by taxpayers. Instead of rebalancing this injustice, Juncker’s package seeks to generalise this principle throughout the entire economy.”

Markus Trilling: “Juncker’s package may be favourable to big investors in large infrastructure, including potential white elephant projects that will receive guarantee returns on risk free investments. The effects for Europe’s economies, though, are far less clear and may even be negative as seen recently in the Spanish Castor project.”

Notes for the editors:

– The EU Project Bonds Initiative analyzed: http://www.counter-balance.org/what-perspectives-for-the-project-bonds-initiative/

– More on the Castor Project: http://www.counter-balance.org/first-eu-project-bonds-fail-and-will-cost-spain-eur-14-billion/

– On 2 December a roundtable will be organized on in the European Parliament: ‘The European Project bonds – What impact on EU public finance and what vision for the future’

– Counter Balance commented earlier on the investment package: “A €300 billion growth package: don’t just spend it, spend it wisely” (Euractiv) – http://www.euractiv.com/sections/eu-priorities-2020/eu300-billion-growth-package-dont-just-spend-it-spend-it-wisely-309136