Never again Sostanj, NGOs warn European public banks after Slovenia debacle

After the EIB and the EBRD disbursed a promised 650 million euros for Slovenian lignite plant TES 6 on March 8, Focus Slovenia, CEE Bankwatch Network, and 96 other NGOs are today sending a letter to the two banks calling on them to never commit to such a misguided loan again.

“In the last two years, we have seen the EIB and the EBRD, which had committed to covering approximately half the costs of the unit, become increasingly embarrassed by this project, but at the same time seemingly not managing to find a legal way to extricate themselves out of it,” comments Lidija Zivcic from Focus in Slovenia. “With this letter, we want to impress upon the banks that there are steps that they can and must take today in order to avoid financing more of such controversial projects in the future.”

The signatories of the letter note the main reasons why Sostanj was undeserving of public loans from the EIB and the EBRD:

• Slovenia will now have to choose between failing to reduce its emissions by 80-95 percent by 2050 and closing Sostanj 6 before the intended date;
• No alternatives to a lignite or coal unit were seriously examined. Having invested so much public money in a new lignite plant, the development of energy efficiency and renewables in the country will be crowded out;
• Health impacts from the project were not taken into consideration and it was left to civil society to find out that Unit 6 would annually (from 2016 on) cause between 33 and 48 deaths and create between EUR 168 million and EUR 242 million in damage to the national economy;
• Corruption allegations about the project were public knowledge when the EIB approved the second tranche of its loan and the EBRD approved its loan in 2010. Even now OLAF, the European Anti-Fraud Office, has not yet concluded its investigation into the case, which still threatens to cause further problems for the project;
• When the project originally went to the EIB for financing consideration, most people in Slovenia did not even know it existed. This failure to ensure adequate public consultation seriously back-fired later when the project became highly controversial to an extent that threatened its continuation.

The 98 organisations signing the letter to the EIB and EBRD presidents are recommending a set of measures that need to be taken by the banks immediately in order to avoid such mistakes from being repeated in the future:

• Ensure that the new Energy Policies of the two banks (both of them being updated this year) finance energy efficiency and sustainable renewable energy rather than fossil fuels, especially coal, in order to contribute to global greenhouse gas reductions of 50-70% by 2050 and the EU's decarbonisation agenda;
• Examine more carefully project alternatives instead of accepting project sponsors' claims that none of them are viable;
• Ensure that wide public participation on large and potentially high-impact projects takes place at a stage when all options are open, and includes all relevant stakeholders. Most importantly, the banks need to seriously listen to the concerns raised;
• Write into financing contracts a clause stating that funds will not be disbursed in case of ongoing national or European level fraud or corruption investigations.

“The EBRD is preparing to finance other coal projects across Central and Eastern Europe, the most notorious being the new lignite plant Kosovo C close to Prishtina, in which the EBRD has expressed an interest recently,” comments Pippa Gallop from CEE Bankwatch Network. “Kosovo C looks strikingly similar to Sostanj 6 in that it would prevent Kosovo from making a transition towards a more energy-efficient and renewables-based economy and the EBRD must wake up to realise this before it turns itself into the bankroller of disastrous energy projects across the Balkans.”

Read the NGO letter here:

Read more on the energy lending of both banks here: