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Member States set to block greening of next Cohesion Policy

Brussels — Meeting today in the General Affairs Council, leaders of EU Member States have significantly watered down last year’s Commission proposal on greening the next Cohesion Policy 2014-2020 (1). Much of the power over how to spend EU regional funds is set to remain with national governments with only weak demands placed on the capitals over how to spend EU funds towards building a low-carbon European economy.

“The contents of the text approved today by the Council amount to an abandoning of the Cohesion Policy’s alignment to Europe 2020 objectives,” comments Markus Trilling, CEE Bankwatch Network EU funds coordinator. “As we have seen in the current budget period, this actually means that, particularly in Central and Eastern Europe, regional funds will likely continue to be poured into highways, airports and incinerators.” (2)
 
According to Bankwatch, some of the most problematic aspects of the Cohesion Policy legislation approved today in the Council are:

  • the relativisation of the EU 2020 objectives (from the draft Cohesion Policy legislation proposed by the Commission in the summer of 2011) as a strategic direction for the spending of regional funds;
  • the weakening of safeguards, including environmental conditions, on which the awarding of Cohesion moneys had been proposed to be conditioned;
  • commitments by national governments related to the receiving of regional funds will be included in partnership agreements – not contracts, as proposed by the Commission – losing their legally binding nature and not requiring Commissions approval anymore in important areas such as the implementation of sustainable development principles;
  • the demands of including civil society partners in decisions over the allocation of funds have been drastically weakened;
  • the demands for clear targets and result indicators related to how the regional funds are used have been watered down;
  • member states preserve a right to reject certain measures on the grounds of increased administrative burden, opening the door for certain transparency or environmental requirements to be left unimplemented at national level.

 
“If the next Cohesion Policy ends up in the form we have seen indicated during today’s Council, this means we are giving up the chance to transform the next Budget of the EU into a tool for decarbonising our economies, into an engine of sustainable development for our regions,” adds Trilling.
 
“We are calling on MS to assume their responsibility towards future generations and use EU regional development funds for the benefit and well-being of their citizens, which would clearly imply committing to European long-term targets on climate and resources and including stakeholders in the planning of investments priorities,” says Markus Trilling. “At the same time, the European Parliament should not allow member states to use EU funds for investments undermining European objectives and priorities.” (3)
 

For more information, contact:

Markus Trilling
EU Funds Coordinator
CEE Bankwatch Network
markus.trilling AT bankwatch.org

Notes for the editors:

 
(1)    See the Commission proposal at: http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm
 
and Bankwatch’s take on it at:
https://bankwatch.org/checklist-eu-cohesion-policy
and at:
https://bankwatch.org/publications/funding-europes-future-how-cohesion-policy-2014-2020-can-deliver-europes-people-and-env
 
(2) See Bankwatch’s map of harmful projects financed with or considered for financing with EU       funds: https://bankwatch.org/bwmail/51/new-eu-funds-map-adds-calls-sustainable-eu-budget
 
(3) The European Council and the European Parliament both need to amend and adopt the Commission proposal from last year in order to finalise the legislative framework for the next Cohesion Policy. These legislative steps are expected to finish in 2013 only.

Slovenia: The EBRD freezes loan disbursements in Alstom’s coal project over corruption allegations. NGOs call on the EIB to follow suit

Paris, 18 April 2012 — The European Bank for Reconstruction and Development (EBRD) announced that it is freezing the disbursement of the promised EUR 100 million loan for the construction of a new lignite block at thermal power plant TES 6 in Šoštanj, Slovenia. The decision by the EBRD comes after a group of Slovenian and international NGOs approached the EBRD asking for the bank to halt the loan until corruption allegations are investigated.(1)

In June 2008, Alstom “won” a public contract for the construction of a new power plant in Šoštanj, Slovenia (TEŠ 6 Project), within the framework of a project funded by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).(2) In a report issued on February 17 this year, the Slovenian Commission for the Prevention of Corruption suspects that acts of corruption may have interfered with the tender process, to the benefit of Alstom. In addition to the close ties between Alstom and several actors in the procurement process, the Commission clearly states that “the project [TES 6] is designed and implemented in a non-transparent manner, lacks supervision and is burdened with political and lobbying influences, and as a result there has been [and still is] a high risk of corruption and conflict of interest”.

This is not the only case where Alstom has been implicated in corrupt practices. In Switzerland, one of Alstom’s subsidiaries was convicted at the end of last year in relation to corruption of foreign public officials in Latvia, Tunisia and Malaysia, and in February this year the World Bank (WB) debarred two Alstom subsidiaries and their affiliates for having bribed a Zambian official in order to win a contract funded by the WB. (See overview of the cases below).

Corruption impedes free competition, undermines institutions’ credibility and legitimacy, and ultimately leads to poorer quality implementation of projects, usually at higher than necessary costs to public budgets. Such consequences contrast with the very mission of Multilateral Development Banks such as the EIB and EBRD.(3)

In this context, SHERPA, Focus and Bankwatch call the EIB to follow in the wake of the EBRD and to freeze financing for the TES 6 Project until all the investigations are concluded and light is shed on the conditions of the contract awarded to Alstom, in strictest accordance with the Multilateral Development Banks’ joint Anti-corruption commitments.

Furthermore, SHERPA, Focus, and Bankwatch call on the EIB to ratify the Agreement for Mutual Enforcement of Debarment Decisions (4) as soon as possible and to temporarily ban Alstom Hydro France and Alstom Network Schweiz AG (Switzerland), the two subsidiaries involved in the public officials corruption scandal in Zambia, from bidding for any new call for tenders linked with projects funded by the bank.

Finally, given the multiple corruption scandals around Alstom, SHERPA, Focus and Bankwatch call on the banks to be particularly cautious with respect to any on-going or planned projects in which Alstom is involved. This appears all the more necessary considering recent comments made by Patrick Bessy, Alstom’s Vice President in charge of communication, who did not seem worried about the World Bank’s debarment decision: “We [the Alstom Group] can still participate [in WB’s calls for tenders] through other subsidiaries”.(5) SHERPA, Focus and Bankwatch expect the company to tackle corruption issues more seriously and to perform an in-depth review of its anti-corruption policy.

 

For more information contact:

Association SHERPA (France)
Maud Perdriel-Vaissière
maud.perdriel-vaissiere AT asso-sherpa.org
+ 33 1 42 21 33 25

Rachel Leenhardt
communication AT asso-sherpa.org
+ 33 1 42 21 33 25

Focus Association for Sustainable Development, (Slovenia)
Lidija Živčič
lidija AT focus.si
+38615154080
 
CEE Bankwatch Network
Piotr Trzaskowski
piotr.trzaskowski AT bankwatch.org
+48509162988

 
SHERPA is a Paris-based non-profit organization dedicated to protecting and defending victims of economic crimes. The association brings together international jurists and lawyers and works in close collaboration with civil society organizations from all over the world.
www.asso-sherpa.org

Focus Association for Sustainable Development is an independent, non-governmental, apolitical and non-profit environmental organisation based in Ljubljana, Slovenia. The mission of Focus is to stimulate solutions for environmentally and socially responsible life through education, awareness raising and co-shaping policies in the field of climate change. www.focus.si

CEE Bankwatch Network is an international non-governmental organisation with member organisations from countries across central and eastern Europe (CEE). We monitor the activities of international financial institutions which operate in the region and promote environmentally, socially and economically sustainable alternatives to their policies and projects. www.bankwatch.org

OVERVIEW OF THE RECENT CORRUPTION CASES INVOLVING ALSTOM

 
November 22, 2011 – Alstom Network Schweiz AG was found guilty by the Office of the Attorney General (OAG) of Switzerland and ordered to pay a 36.4 million Swiss francs compensation (42 million euros), for having bribed officials in three different countries. The OAG concluded that Alstom Network Schweiz AG was guilty for “not having taken all necessary and reasonable organizational precautions to prevent bribery of foreign public officials in Latvia, Tunisia and Malaysia”. Although the conviction does not directly target the parent company Alstom SA, the OAG considered that “Alstom SA, as the senior holding company, is responsible in part for the organizational deficiencies identified”. In addition, Alstom SA supported all financial costs related to the case.
For more details, see the press release.

February 17, 2012 – The Commission for the Prevention of Corruption in Slovenia is an independent state institution in the Republic of Slovenia. In February it published its interim report about irregularities in the construction of a new power plant in Šoštanj, Slovenia. Among numerous alleged breaches of policies and laws in the project, the Commission notes that both the technical commission implementing the public procurement for TES 6 and the group negotiating the contract included employees of CEE Inženiring za energetiko in ekologijo d.o.o., which has close business links with Alstom. As a consequence, “conditions for corruption” were created, as Alstom “could have had access to complete information about the offer of the competing supplier”.

The Commission is continuing its investigation, while separate investigations into the possible unlawful acts at TEŠ 6 have already been opened by other Slovene institutions: the National Investigations Office and the police in the town of Celje. This week the Slovene parliament is expected to hold a first discussion on the law granting a state guarantee for the remaining tranche of the EIB loan worth EUR 440 million. The final decision is expected to take place only in a few months. In this context, Alstom’s reported threat to charge the Slovene government for delaying the construction of TES 6 while facing suspicions of fraud is particularly shocking.(6)

See the unofficial English translation of the report.

More information about the project can be obtained on Bankwatch’s website.
 
February 22, 2012 – Alstom Hydro France and Alstom Network Schweiz AG, as well as their affiliates, were debarred from the bidding of the World Bank for a period of three years, after paying a 110,000 Euros kickback to Zambian officials to ensure they would obtain a public contract within the context of a project funded by the World Bank in 2002. The two companies have agreed to pay $9.5 million in compensation to the Bank, which represents 40% of the amount foreseen under the electricity network rehabilitation contract in Zambia. Alstom SA and its direct subsidiaries will be conditionally non-debarred during the same period: they will retain the right to participate in World Bank’s projects, but they will have to strictly observe the terms agreed with the World Bank; should they fail to do so, they will be similarly debarred.

Since then, the EBRD, the Asian Development Bank and the Inter-American Development Bank have implemented cross-debarment in the wake of the World Bank’s decision.

See the World Bank’s press release and SHERPA’s press release for more information.

Notes for the editors:

(1)  Referring to the preliminary assessment of the corruption allegations undertaken by the anti-corruption body of the EBRD the President of the bank wrote on April 16th “Disbursements are suspended until the Bank is satisfied that all conditions for such disbursement are met, which include conclusions from this investigation satisfactory to the bank.” In the second statement made by the EBRD just a day later it was specified that the suspension does not have a formal character.

Letter from the president of the EBRD Tomas Mirow to Focus Association for Sustainable Development, Greenpeace and CEE Bankwatch Network, April 16, 2012:
https://bankwatch.org/documents/response-EBRD-Sostanj-loansuspension-16Apr2012.pdf

Letter from the Managing Director of the EBRD Riccardo Puliti to Focus Association for Sustainable Development, Greenpeace and CEE Bankwatch Network, April 17, 2012:
https://bankwatch.org/documents/response-EBRD-Sostanj-17Apr2012.pdf

(2)  The EIB has approved a contribution of 550 million euros, of which 110 million euros have been already paid out while the EBRD loan amounts to 200 million euros, out of which 100 million euros is being syndicated to a consortium of private banks.

(3)  « Dealing resolutely with corruption is key to the development of sustainable economies that will attract investment and engender confidence», Thomas Mirow, President of the EBRD, in the press release of the signatories of the April 9, 2010.

(4) Agreement signed on April 9th, 2010 by the main MDBs (World Bank, European Bank for the Reconstruction and Development, the Asian Development Bank, the African Development Bank and the Inter-American Development Bank), except the European Investment Bank.

(5) Article from Wall Street Journal, February 22, 2012 and from La Tribune, February 23, 2012 (French)
http://www.latribune.fr/actualites/economie/international/20120223trib000684517/la-banque-mondiale-place-une-filiale-suisse-d-alstom-sur-liste-noire.html

(6) These threats appeared in Slovene and international media: Bloomberg dispatch, March 28, 2012
http://www.bloomberg.com/news/2012-03-28/slovenia-may-pay-damages-to-alstom-on-guarantee-delay-fi.html

Gazela reloaded: another illegal Roma resettlement in Serbia on account of an EIB funded project

Belgrade – By the end of April, one hundred Roma families are expected to be illegally resettled from Belgrade neighbourhood Buvljak to several locations including Resnik, where current inhabitants are these days protesting against their arrival [1]. The resettlement is being carried out by Belgrade authorities without a proper resettlement plan or any consideration of the needs of the Roma and potential for inter-racial conflict [2]. The move is deemed necessary as part of the Sava Bridge and adjacent road construction, financed by the European Bank for Reconstruction and Development and the European Investment Bank respectively. [3]

“As sad as it is to see the anti-Roma protests taking place over the past days in Resnik, it comes as no surprise to us, because locals there have been giving signals they do not want Roma to be moved to the area for a long time,” explains Zvezdan Kalmar from Serbian NGO CEKOR, a member group of CEE Bankwatch Network. “This kind of response is to be expected when neither local people nor the Roma families have been consulted about their needs and wishes. Unfortunately this is just one of several mistakes that have been made in this process: no Resettlement Action Plan has been drawn up, nor have any efforts been made to ensure the needs of the resettled families will be met in the new location.”

The one hundred Roma families are currently living in the Buvljak settlement and several other locations along the Belgrade-Budapest rail transport corridor, where roads meant to serve the newly constructed Sava Bridge are planned to be built with financing from the EIB.

In August 2009, 150 Roma families living in the vicinity of Gazela Bridge in Belgrade were resettled illegally as part of wider reconstruction plans related to EIB-sponsored Gazela Bridge. [4] Soon after the illegal resettlement, it was proven that the Roma families could not integrate properly in their new locations, because of lack of work opportunities and proper living conditions alongside being geographically marginalised on the far edges of the city. The EIB’s Complaints Office, which investigated the project, ruled that there had been a number of mistakes on the EIB side done which were partly to blame for the lack of Roma integration and for a significant project delay.

“Moving Roma families in the same way again, without a proper plan to ensure their long-term social inclusion, is sure to lead to failure, not least because of igniting conflicts between the resettled Roma and hostile local communities,” says Kalmar.

The activist points out that the European Investment Bank, the main financial supporter of the roads requiring this resettlement, has been warned by local NGOs about the possible negative consequences of such illegal resettlements of Roma in Serbia from as early as September 2010, to no avail.

“It is worrying to see that the EIB has learnt nothing from the disastrous Gazela resettlement that it proved powerless to control,” adds Kalmar. “The EIB should act immediately to stop any work under the project it is financing until a resettlement action plan is completed and consulted with interested Roma families, NGOs, and host communities.”

For more information, contact:

Zvezdan Kalmar
CEKOR, Serbia
Bankwatch Serbian national coordinator
vodana at gmail.com
+381 65 5523 191

Notes for the editors:

[1] Protesters said they will continue the protests until authorities give up the resettlement idea. Details about the protests:
http://www.balkaninsight.com/en/article/belgraders-protest-against-settling-of-roma (English)
and
http://www.vesti-online.com/Vesti/Hronika/216385/Resnik-Policija-sprecila-protest-protiv-Roma (Serbian)

Resnik is in the outskirts of Belgrade and next to another large infrastructural development on corridor X (a Belgrade bypass financed by the EBRD http://www.ebrd.com/english/pages/project/psd/2006/36651.shtml ).

In addition to Resnik, the Roma families are expected to be resettled to a couple of other locations around Belgrade, some of which have seen anti-Roma protests in the past, even though the precise locations have not all been made public by the authorities.

[2] Read about long-term efforts by local NGOs to get local authorities and banks financing the project to promote a proper resettlement plan here:
https://bankwatch.org/news-media/blog/deja-vu-belgrade

[3] The European Investment Bank is offering 160 million euros for the construction of Sava Bridge and access roads:
http://eib.europa.eu/projects/loans/2009/20090526.htm

The European Bank for Reconstruction and Development financially supported the construction of the Sava Bridge:
http://www.ebrd.com/pages/project/psd/2005/34913.shtml

[4] Read more about the Gazela resettlement and its negative consequences:
https://bankwatch.org/our-work/projects/gazela-bridge-rehabilitation-belgrade-serbia
and
http://outofsight.tv/

[5] See an Amnesty International petition against the illegal resettlement of the one hundred Roma families:
http://www.amnesty.ie/content/roma-families-immediate-risk-eviction

EBRD: New president – new direction for the bank?

With the European Bank for Reconstruction and Development (EBRD) in the process of selecting a new president [1] as the term of current office holder Thomas Mirow approaches its end, CEE Bankwatch Network, an NGO that has been monitoring the EBRD for over a decade, makes a call on the bank’s shareholders and new president to reassess some of its past – faulty – approaches:

  1. Despite its name, the EBRD to date has not created means to measure the development impacts of its operations even though sustainable development is core to its mandate and the bank is supposed to contribute to poverty alleviation in its countries of operation classed as developing countries; Bankwatch calls on the EBRD to:
    • set measurable human development and environmental goals in country and sectoral strategies, not only market-oriented ones
    • ensure that its transition indicators measure social (including employment), development and environmental outcomes, not just privatisation and liberalisation of the economies
    • report annually to the EU how it is contributing to the EU’s goals for external action, particularly on poverty eradication
  2. Via its loans, the EBRD promotes unsustainable economic models, for instance, economies over reliant on natural resource exports in Central Asia or growth driven by unsustainable consumer credits and foreign currency borrowing in central and eastern Europe; Bankwatch calls on the EBRD to:
    • review its portfolio to avoid promoting dependence on the export of commodities in transition countries and instead foster the development of higher value-added economic activities
    • ensure that its loans to small and medium enterprises done via financial intermediaries actually reach the intended beneficiaries; avoid financing of financial intermediaries (including private equity funds) that make use of tax havens; generally improve disclosure on its financial intermediary (FI) operations
    • tighten up its due diligence and public disclosure requirements on the value for money and budget burdens incurred through public-private partnership projects (a model that the bank heavily promotes)
  3. While claiming to promote the transition to low-carbon economy in its countries of operation and making some commendable efforts in this direction, the EBRD continues to lend to fossil fuel projects; Bankwatch calls on the EBRD to:
    • develop a climate policy that will set clear and ambitious CO2 reduction goals to guide the bank’s investments across all sectors
    • phase out loans for fossil fuels – especially coal – and aviation and increase energy efficiency and sustainable new renewables investments
    • adopt a robust set of sustainability criteria for renewable energy to ensure that promotion of renewables does not conflict with the EU’s other policy commitments such as halting biodiversity loss by 2020
    • introduce sustainability indicators as part of the bank’s transition indicators system
  4. The EBRD currently cooperates with undemocratic regimes in countries such as Kazakhstan, Azerbaijan and Russia while also expanding its operations into North Africa and the Middle East, a region on which it has virtually no expertise; Bankwatch calls on the bank to:
    • refrain from lending to Egypt, Morocco or Jordan until these countries have legitimate, democratically elected governments that respect human rights
    • conduct in-depth consultations with a wide variety of local stakeholders in North African and Middle Eastern countries planned for expansion about whether and/or how they want the EBRD
    • regularly revise its policies in relation to existing countries of operation such as Kazakhstan, Azerbaijan and Russia where democratic and pluralist principles are clearly not implemented

See the letter Bankwatch sent today to the bank’s Board of Governors here (pdf)

Notes

[1] For the first time since the EBRD was established 21 years ago, the new president of the bank will be selected following a “contest” between several candidates that have expressed an interest in the position: current president Thomas Mirow, Suma Chakrabarti (nominated by the UK government), Philippe de Fontaine Vive Curtaz (currently a vice-president of the European Investment Bank), Jan Bielecki (nominated by Poland), and Bozidar Djelic (Serbia). The new president is expected to be chosen at the bank’s annual meeting, which will take place May 18-19 in London.

For more information, contact:

Fidanka Bacheva-McGrath
Bankwatch EBRD coordinator
fidankab at bankwatch.org

Pippa Gallop
Bankwatch research coordinator
pippa.gallop at bankwatch.org

Bankwatch report: EU supports nuclear life time expansion in Ukraine


Money from Euratom and the European Bank for Reconstruction and Development is to be used to finance the life time expansion of Ukrainian nuclear reactors, 12 of which had initially been scheduled to close down no later than 2020, according to an expert report published today by CEE Bankwatch Network (1).

Ukraine’s national energy strategy for 2030 envisages that all of the country’s 15 nuclear reactors will have their life time expanded allowing the country to become an important source of electricity imports for the European Union. 12 of Ukraine’s 15 reactors were designed to finish operations before 2020; two of these 12 were supposed to be taken off the grid in 2010 and 2011 respectively but have already seen their licenses extended to operate for an additional 20 years each.

A plan for the safety modernisation of the 15 reactors to be implemented by 2017 is outlined in a „Safety Upgrade Project” (SUP) worth a total of over 1.45 billion euros and currently considered for financing by both the EBRD (up to 300 million euros) and Euratom („with the loan of a similar size”) (2). However, while the two European public institutions claim that they would be supporting the modernisation of the reactors, the expert study published by Bankwatch today shows that some of the measures included in the SUP for financing are necessary for the lifetime expansion of the plants and not for their regular functioning until the initially planned term.

„Our analysis has revealed that most of the modernisation measures included in the SUP, such as those related to component integrity and reactor protection systems, are conditions for the lifetime extension of the reactors,” comments nuclear expert Patricia Lorenz, one of the authors of the report. „Reactors that are scheduled for closure in 2012 or 2014 would normally not need the upgrades called for in the SUP unless there is a plan to use them past their original design life time.”

Iryna Holovko, Bankwatch national coordinator in Ukraine, adds: “What is particularly worrying is that this life time expansion is being done in total secrecy, without neighbouring countries and the European public in general being informed about these plans as would be required by international legislation such as the Aarhus Convention.

The EBRD and Euratom had initially requested assessing the SUP via a Strategic Environmental Assessment (SEA) but ended up accepting a much narrower Ecological Assessment that does not analyse either all the risks posed by this lifetime expansion or alternative scenarios. Even more, the SUP was prepared prior to the nuclear disaster at Fukushima, and before the EU called for rigorous stress tests to be conducted at all nuclear plants inside the union and in its neighbourhood.

“It is not acceptable that two European public institutions go ahead with considering this project before the Ukrainian stress test report is peer reviewed and accepted by the EU and before its results are made known to citizens whose lives could be directly affected by it,” adds Holovko.

According to Bankwatch, instead of supporting a very risky prolongation of Ukraine’s nuclear reactors beyond their design life time, the EU and the EBRD should help prepare these reactors for safe closure and decommissioning, while at the same time actively supporting alternatives to nuclear power: the development of local renewable energy sources and utilising Ukraine’s enormous potential for decreasing the energy intensity of the economy.

Notes for the editors:

1. Read the report online at:
https://bankwatch.org/sites/default/files/Ukraine-SUP-review.pdf

The report was commissioned by Bankwatch and authored by Austrian nuclear energy consultants Antonia Wenisch and Patricia Lorenz.

2. The European Commission plans to decide on the EURATOM loan in May 2012, the EBRD in September 2012. Read more about European public banks’ support for nuclear safety in Ukraine at:
https://bankwatch.org/our-work/projects/nuclear-power-plant-safety-upgrades-ukraine

and download report about EU support for nuclear expansion in Ukraine at:
https://bankwatch.org/publications/ignoring-chernobyls-lessons-how-eu-energy-security-expands-nuclear-energy-ukraine

List of design life time of Ukrainian reactors

For more information, contact:

Iryna Holovko
Bankwatch Ukrainian national coordinator
iryna at bankwatch.org
Tel.: +38 050 647 67 00

Patricia Lorenz
Nuclear energy consultant
patricia.lorenz at foeeurope.org
Mobile: 0043 676 44 64 254

The dirty French-Slovenian connection

Slovenian state anti-corruption body claims ALSTOM could have benefited from corrupt acts to get deal to build new lignite plant at Sostanj.

Ljubljana – The Slovenian government today announced its conditional support* for granting a state guarantee for a loan from the European Investment Bank for the construction of a new 600 MW block at the lignite plant at Sostanj [1]. The government’s announcement came in spite of serious warnings issued this week by the State Commission for the Prevention of Corruption that acts of corruption could have influenced the awarding of the contract to French company ALSTOM and that the law on the state guarantee itself was initially drafted by employees of HSE, the owner of the Sostanj power complex [2].

“The Commission for the Prevention of Corruption sent a strong signal to our government not to continue promoting TES 6 until corruption and unlawful lobbying allegations are cleared and proper safeguards are in place to avoid such practices in the future,” comments Lidija Živčič from Slovenian group Focus [3]. “Considering the seriousness of the concerns raised by the Commission, any responsible decision-maker should support putting a moratorium on the construction of the new plant until the propriety of the management of TES 6 is properly investigated by official bodies.”
 
The Slovenian Commission for the Prevention of Corruption concludes that “the project (TES 6) is designed and implemented in a non-transparent manner, lacks supervision and is burdened with political and lobbying influences, and as a result there has been (and still is) a high risk of corruption and conflict of interest.”
 
The Commission notes that both the technical commission implementing the public procurement for TES 6 and the group negotiating the contract included employees of CEE Inženiring za energetiko in ekologijo d.o.o., which has close business links with ALSTOM. As a consequence, „conditions for corruption” were created, as ALSTOM „could have had access to complete information about the offer of the competitive supplier”. The main competitor possibly disadvantaged by these circumstances was German company Siemens [4].
 
Additionally, the report states, Slovenian lobbying regulation has been breached as the authors of the proposed law on state guarantee for an EIB loan for TES 6 are members of economic entity HSE, the owners of the Sostanj energy complex. A state guarantee law needs to be passed by the Slovenian parliament in order for TEŠ 6 to cash in EUR 440 million our of the EUR 550 million loan from the EIB needed to cover a part of the 1.3 billion euros cost of the new block [5]. 4/5 of the EIB loan is to be guaranteed by the Slovenian state, with the remaining one fifth guaranteed by private banks.
 
„The two European public banks, EIB and EBRD, who plan to finance half of the costs of TES 6, cannot turn a deaf ear to the call of the Slovenian Commission for the Prevention of Corruption,” says Bankwatch’s Piotr Trzaskowski. „Not deferring their loans at this moment would mean that the EIB and the EBRD are not interested in checking whether the allegations of corruption are true. In fact, they should use this opportunity to withdraw from a project which, apart from being based on possible unlawful actions, also stands in blunt contradiction with the EU long-term climate policy both banks must support.”

Investigations into the possible unlawful acts at TES 6 have already been opened at the National Investigations Office and at the Police in the town of Celje. The Commission for the Prevention of Corruption has also called on the Slovenian Prosecutor General to establish a special group for further investigating this case.
 

For more information contact

 
Lidija Zivcic
Senior expert, Focus association for sustainable development
tel: +38641291091
lidija at focus.si
 
Piotr Trzaskowski
Energy and climate coordinator, CEE Bankwatch Network
Tel:  +48 509162988      
piotr.trzaskowski at bankwatch.org
 
 

Notes for the editors

 
* The Slovenian government announced its support for the state guarantee law if the list of conditions below is met (referring stricly to the economic viability of the project and respecting terms from the investment plan):

  • The investor must negotiate with all suppliers with the aim to lower the costs from NIP 4 (4th investment program; 1.302.747.010 euros);
  • PV Coalmine Velenje and TEŠ must sign a contract on the long-term supply of lignite at the maximum price of 2,25 EUR/GJ before the state guarantee is issued;

    • The investor must ensure the project will be finished in accordance with the agreed timeline;

  • The investor must ensure all the conditions are met for achieving an internal rate of return of the project in line with the sectoral energy policy;
  • The investor must limit the CO2 emissions in line with investment program (NIP 4).

1. Slovenia plans to build a new 600 MW unit for the Sostanj lignite power plant (TES6) which would replace the power plant’s existing units 1-4 and possibly 5. Its promoters argue with increased efficiency, but in fact, this one lignite power plant alone will swallow up almost the country’s entire carbon budget by 2050. Read more about the project at:
https://bankwatch.org/our-work/projects/sostanj-lignite-thermal-power-plant-unit-6-slovenia

2. The commission report can be downloaded (in Slovenian) at:
http://www.kpk-rs.si/download/t_datoteke/2724

An unofficial English translation is available at:
https://bankwatch.org/sites/default/files/StateCommissionReport-corruption-TES6-23Feb2012.pdf

3. Already in November last year the European Commission was informed by Focus about irregularities in the procurement procedure for the project. The full text of the complaint can be found here:
https://bankwatch.org/sites/default/files/Complaint-EC-SostanjPublicProcurement-02Nov2011.pdf

4. Consortium SIEMENS AG, which included Hitachi Power Europe GmbH and SIEMENS d.o.o.

5. Loans from the European Investment Bank (EUR 550 million) and the European Bank for Reconstruction and Development (EUR 100 million) add up to more than 50% of the overall costs of the investment.