EBRD should not invest in Polish energy company suspected of corruption, say European NGOs

17.09.2012

Warsaw – The European Bank for Reconstruction and Development is considering participating in a EUR 772 million loan for a subsidiary of major Polish energy group ENEA, whose management is currently being investigated by authorities because of alleged irregularities in management and misuse of public funds.

On October 30, the EBRD is set to decide whether it would participate with approximately EUR 194 million* to a total EUR 772 million loan from several international development banks benefiting ENEA Operator, a fully owned subsidiary of ENEA S.A., the majority state-owned top company of the ENEA Group (1). The European Investment Bank has already decided in favour of contributing to this loan. (2)

CEE Bankwatch Network together with a coalition of 20 European environmental NGOs (3) is asking the EBRD not to offer European public money to ENEA Operator until allegations of mismanagement and misuse of public funds at the mother company, ENEA S.A., are cleared by investigators. At the moment, the Polish Interior Security Agency (ABW) and Central Corruption Agency (CBA) are closely checking alleged irregularities in ENEA’s management and the district public prosecutions office in Poznań has opened a corruption investigation of ENEA (4). Furthermore, financial irregularities at ENEA S.A. have been repeatedly discussed publicly in the Polish Parliament. (5)

“After years of monitoring the EIB and the EBRD, we have seen too many cases of these banks signing public loans for corrupted Eastern European company managers; it happened as recently as last year in Serbia and in Slovenia,” says Kuba Gogolewski, Polish energy coordinator at CEE Bankwatch Network. “More and more eyes are turning to the practices of the banks and they simply cannot afford to get involved in yet another case where corruption is suspected.”

Additionally, the NGOs are asking the EBRD not to decide in favour of this loan on the grounds that it would indirectly contribute to the expansion of coal power use in Poland (6) at a time when no more investments in fossil fuels should be made because of the climate imperative and after a year in which Poland has blocked a series of EU climate-friendly initiatives not least because of its extensive coal dependence. (7)

Notes for editors:

* This is the equivalent of the PLN 800 milion amount quoted on the EBRD website describing the project:
http://www.ebrd.com/english/pages/project/psd/2012/43001.shtml

(1) About ENEA Group:
http://www.ir.enea.pl/en/information_about_the_enea_capital_group/

(2) The European Investment Bank has not yet signed the contract, but it has already approved the loan on the 24th of April 2012: http://www.eib.org/projects/pipeline/2011/20110355.htm

(3) The European Coal Finance Campaign is made up of over 20 member and partner organizations, a list of which is available here
http://www.banktrack.org/show/pages/europe

(4) See two articles in main Polish media:
http://polska.newsweek.pl/psl-w-biznesie--czyli-elektrownia-ludowa,94258,1,1.html
and
http://www.ekonomia24.pl/artykul/706160,927127.html?p=1
and read the letter sent by NGOs to the EBRD on the topic of mismanagement at ENEA at:

(5) Details on the ongoing investigations in Poland on the Bankwatch blog:

(6) The PLN 800 million (EUR 192 million) are nominally to be invested by ENEA Operator into a better distribution network. But the main investment priority for ENEA S.A. in this period is the construction of a new 1000 MW coal block next to Warsaw (Kozienice unit 11). ENEA S.A. at the moment finds itself in a very good economic situation, with a net profit of PLN 456 million (EUR 111 million) in the first half of 2012. Additionally, ENEA S.A. has secured PLN 4 billion (one billion euros) through an agreement with a consortium of five banks on a corporate bond issue. This means that if the company was to drop its plan to invest PLN 6.28 billion (EUR 1.53 billion) in Kozience unit 11 (according to current estimates), it would dispose of sufficient resources to carry out the extensive investment programme upgrading ENEA Operator’s distribution network (estimated to cost PLN 3.2 billion, or EUR 0.77 million, for 2012-2015).

(7) Read more about Polish positions in EU negotiations on the Bankwatch blog: