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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

European Ombudsman: EIB weakens EU efforts to strengthen rule of law

Brussels – In an unprecedented ruling this week, the European Ombudsman concluded at the end of an investigation into the EIB’s involvement with a road construction project in Bosnia and Herzegovina that the institution’s behaviour was “totally unacceptable” and it “risked putting into question the EU’s commitment for strengthening the rule of law in Bosnia and Herzegovina.”

During the investigation, the Ombudsman found that the EIB went on to finance the project to construct a bridge over the Sava river in Bosnia and Herzegovina regardless of complaints from an Italian company Impresa Pizzarotti & C. SpA which had been excluded from the tender despite having offered the lowest bid.

The EIB’s Complaints Mechanism, an internal body meant to ensure that the institution complies with its own policies, had ruled that the complaint of the Italian company was grounded, yet the EIB management chose to ignore the ruling of its own policy-enforcing body.

The European Ombudsman Emily O’Reilly found that the EIB management decision was based on an incorrect interpretation of the tender documents and said she was considering opening an own-initiative inquiry into the systemic issues underlying the EIB’s handling of the case.

“An inquiry into systemic issues would be very welcome,” says Anna Roggenbuck, Bankwatch EIB coordinator. “This is not the first time that we see the EIB management ignoring or interfering with the work of its own Complaints Mechanism. NGOs have been for years complaining about this bad practice to the bank but it seems that the management chooses to run counter to its own standards for the short term interests of its clients, often big corporations.”

According to Bankwatch, in sensitive and controversial cases such as the Mopani mines in Zambia, the Bujagali dam in Uganda, or the Sostanj coal power plant in Slovenia, the EIB management has given the impression of interfering with the work of the complaints mechanism. In the Mopani case, there is evidence that the management went against the Complaints Mechanism decision to disclose the investigation report, and in the case of Bujagali EIB President Werner Hoyer has had to send a letter asking EIB staff to ensure the independence of and cooperation with the Complaints Mechanism office.

In a previous ruling from 2013 [1], the European Ombudsman found that1 enormous delays in Bujagali case were caused by insufficient staffing of the Complaint Mechanism office and that the release of the Complaint Mechanism assessment of the case was caused by internal pressure within the EIB.

“The Complaint Mechanism was created to give people an opportunity to defend their rights but this purpose is defeated if the EIB management itself prevents the body from functioning as it should,” says Anna Roggenbuck. “This is unacceptable. We all need to think about better accountability mechanisms for the EIB if this institution is to further the application of the rule of law.”

“In light of the EIB’s extensive role in the upcoming EU investment package of EUR 300bn, it should be made clear that the bank needs to step up its transparency and accountability both towards European citizens and EU institutions,” says Counter Balance’s director Xavier Sol. “But right now what we are seeing is the exact opposite. Currently in the process of reviewing its transparency policy, the bank is actually trying to increase the list of exceptions to information disclosure which would mean that more information can be kept confidential as commercially sensitive.”

According to the Aid Transparency Index 2014 [2], the EIB was assessed as having poor transparency standards among international donors and is one of the two most non-transparent multilateral development banks.

For more information, contact:

Xavier Sol
Counter Balance
Xavier.sol@bankwatch.org

Anna Roggebuck
Bankwatch
annar@bankwatch.org
+ 48 509 970 424

Read more:

Final ruling of the European Ombudsman on the Sava Bridge in Bosnia and Herzegovina case:
http://www.ombudsman.europa.eu/cases/decision.faces/en/58171/html.bookmark

Holding the EIB to account, Counter Balance, April 2014:
http://www.counter-balance.org/holding-the-eib-to-account-a-never-ending-story/

Notes

1. EO 2288/2011/MMN dated 17.01.2013

2. http://ati.publishwhatyoufund.org/index-2014/results/

Image by flickr user ssalonso (CC BY-NC-SA 2.0)

Visegrad countries push for more gas imports in 2030 deal

Prague – The Visegrad plus 2 countries (Poland, the Czech Republic, Hungary, Slovakia, together with Romania and Bulgaria) have all included a strong statement of support for the Southern Gas Corridor into their comments to the drafted EU 2030 Council conclusions to begin in Brussels this Thursday.

The Southern Gas Corridor is a set of planned projects meant to bring gas into Europe from the Caspian region, including three major pipelines: South Caucasus, Trans Anatolian and Trans Adriatic.

In the „energy security” section of the draft Council conclusions, each of the submissions of the six countries from Central and Eastern Europe contains an identical paragraph which states the need for the Southern Gas Corridor projects to be expedited:

„Member States and the Commission will ensure that the implementation of the critical projects of common interest in the gas sector identified in the European Energy Security Strategy, in particular the North South Gas Corridor and the Southern Corridor, will be completed in expedite manner, bearing in mind the necessity of increasing the energy security of the most vulnerable Member states.”

This paragrah is a totally new addition that each of the V4+2 countries have made to the Council conclusions since their meeting September 30th when they coordinated their positions in order to get more out of the bargain with the rest of the EU member states.

During his European Parliament hearing last week, Slovakia’s EU Commissioner designate Maros Sevcovic, the future EU Commission Vice-President for Energy Union, indicated his support for the realisation of the Southern Gas Corridor projects.

“V4+2 countries seem keen on shooting themselves in the foot with this one,” comments Ondrej Pasek, Bankwatch energy campaigner. „They strongly argue for energy security, but instead of pushing for financing of high energy efficiency and renewable targets to help their own citizens and companies get rid of dangerous energy dependency, they just want to put more money in pipelines. Yet the Southern Gas Corridor can only source gas from politically problematic regions, such as the Caucasus or the Middle East. Can this be called security in any sense?”

A 2030 energy efficiency target for the EU of 30 percent would reduce gas demand in Europe by as much as 20 times the import volumes that would be coming through the Southern Gas Corridor, making this new piece of mega-infrastructure redundant. In their coordinated positions, V4+2 countries are all calling for a non-binding 25 percent energy efficiency country for the whole block (not for each individual country).

A study published on the 20th of October by the World Resources Institute shows that more investment in renewables and energy efficiency in three sectors (housing, industry and power generation) can cut natural gas imports to the European Union by 50% and CO2 emissions by 49%.

For Thursday’s summit, Sweden and Denmark have been pushing for at least 30% binding energy efficiency target, with Germany, Luxembourg and Portugal supporting the 30 percent figure (not more). From the Western European countries, only Cyprus and the UK advocate for no energy efficiency target at all. There is no mention of the Southern Gas Corridor in the comments of the countries wanting a higher energy efficiency target.

„In their positions, the Visegrad countries are not only turning against many Western European countries who would want a more ambitious energy efficiency target, but they are also cannibalising EU efforts to build a strong internal power market,” comments Bankwatch’s energy camppaigner Kuba Gogolewski. „This is because they are suggesting financing for more gas pipelines should be given priority over investments in power interconnectors which would help to integrate the European energy market and especially allow countries to share their renewables.”

Comments of V4+2 countries on the draft conclusions of the EU Summit explicitly ask to delete a sentence asking the Union and Member States to secure adequate financing for interconnectors.

”An ambitious EU climate and energy policy for the period after 2020 would essentially eliminate the need for massive investments in natural gas import pipelines such as the Southern Gas Corridor or LNG terminals,” concludes Kuba Gogolewski. „By not adopting ambitious climate policies and giving in to the Visegrad group pressure, the EU would only turn the mantra of gas companies, that we ‘need’ more gas, into a sef-fulfilling prophecy.”

For more information, contact:

Ondrej Pasek, Bankwatch energy campaigner
ondrej.pasek@bankwatch.org
Tel.: 420 608 381 602

Kuba Gogolewski, Bankwatch energy campaigner
kuba.gogolewski@bankwatch.org
Tel.: 0032485358317