Croatia: French CreditAgricole and Alstom, Marubeni Japan and HEP power utility under severe pressure from European NGOs for TPP Plomin C project

18. September 2015. / SEE Energy News

Power utility HEP, Japanese Marubeni, French Alstom and French Credit Agricole Bank, partners for construction of new TPP Plomin unit, are under severe critics from local, regional and European green NGOs lead by BankTrack which reported on CreditAgricole Bank breach of its own environment compliance rules.

HEP, together with its partners, is planning to construct a new 500 MW unit at the Plomin power plant on the Istrian coast. The project, entitled “Plomin C” is being presented as a reconstruction of the Plomin 1 unit, even though it is nothing of the kind, having four times greater capacity than Plomin 1’s 120 MW.

If built, Plomin C would operate until beyond 2050, by which time the EU plans to have a fully decarbonised electricity sector. This single project would therefore prevent Croatia from making its contribution to the EU’s climate action commitments.

The plant has been pushed by HEP and the Croatian government. The consortium that has been chosen as the preferred bidder for the €800 million project consists of the Japanese Marubeni Corporation, which will buy at least 50% of the power produced, and the French multinational Alstom, which will provide the equipment

Environmental concerns have been denied, while concerns about Plomin C’s legality, economic viability, the reputation of the companies chosen to implement the project, and potentially high costs for electricity consumers have been met with silence.

The Istria County Spatial Plan – which stipulates that any new unit must run on gas, and that the whole Plomin complex must not exceed 335 MW – has been illegally ignored, while the planned long-term power purchase agreement looks unlikely to be acceptable under EU state aid legislation.

No serious attempt has been made to examine alternatives to coal, in spite of Croatia’s excellent potential for energy efficiency and renewable energy, especially wind and solar, and its high level of electricity interconnections with neighboring countries.

All these factors have made Plomin C more and more unpopular. In 2014, a country-wide IPSOS poll showed that 64% of respondents are against the plant, while 90.6% believe that Croatia’s energy policy should be based on renewable energy. In March this year, a public consultation run by the Istria County authorities showed that 92% of respondents oppose a new coal-powered unit, while a local referendum on

29 March 2015 showed that 94% of voters oppose the plant. This opposition is partly explained by the health impacts of the pollution from the existing plant and the predicted additional pollution from Plomin C. According to a report by Greenpeace, it will cause 680 premature deaths during the plant lifespan as well as 3,970 lost work-days, and these externalities are predicted to cost €124.8 million

Against this background, the development of the project may well be determined by the financial decisions of banks and investors to support or rule out the project.

A coalition of non-governmental organizations, coordinated by BankTrack, has contacted 38 of the main coal banks at international level in order to warn them about the risks of the project and ask them to not support it. To date, only the French bank Crédit Agricole is involved in the project, in which it plays a critical role through an advisory mandate with Marubeni.

According to Crédit Agricole’s Coal-fired Power Plants Policy, two of the criteria assessed by the bank are the compliance of the project with the national and supranational regulatory framework as well as the relevance of the project for the national economy. “The compliance of the project with the national regulatory framework and with all treaties and international rules to which the Country has committed and is bound” is stated to be an exclusion criterion.

Plomin C project does not comply with the national regulatory framework:

The Plomin C plant contradicts the Istria County Spatial Plan, which stipulates that the total capacity at the site (including the third block) may total only 335 MW, and that any third block must run on gas.

The local and national authorities ’ decisions to issue a location permit and an environmental permit for the plant in contravention of the County Spatial Plan are currently subjects of court challenges by the Istria County authorities and by environmental NGOs.

Plomin C project risks not complying with supranational regulatory framework:

In order to overcome the project’s poor economics, the Prequalification Document for Plomin C suggests that HEP will sign a long-term power purchase agreement with the project company to buy at least 50%of the electricity produced for at least 20 years, and that HEP may be willing to include operation of Plomin 2 into the contract.

Despite the refusal of the company to disclose information about the planned power purchase agreement, including the price of electricity that would be guaranteed to the project company, HEP has confirmed that such an agreement is planned and discussions are ongoing with the European Commission about it.

However, an analysis by Hungarian law association EMLA undertaken in May 2014 shows that it is unlikely that such an agreement can be compatible with EU state aid rules. A further concern is about the price per MWh being offered as part of the contract. Croatian media have reported figures between €75 per MWh and €110 per MWh depending on whether 50% or all electricity is included in the contract. Both of these prices are much higher than current electricity prices in Croatia.

Another criterion addressed by Crédit Agricole when assessing a coal-power plant project is the quality and experience of the constructor. In September 2014, Marubeni was chosen as a preferred bidder, and negotiations have been ongoing ever since, and Alstom was named as the main equipment provider and contractor.

Both companies have a poor integrity record, including several convictions for corruption offences, according to BankTrack report companies are assessed as questionable.

Alstom or its staff have been found guilty of corruption offences in relation to at least seven cases in seven years across different continents, and is under investigation for several more, including around the Sostanj 6 lignite power plant in Slovenia. As a result Alstom has been under observation by the Norwegian Finance Ministry since 2011 after its Council on Ethics recommended in 2010 to exclude Alstom SA from the Government Pension Fund Global.

Marubeni has been found to have been involved in two major corruption cases within three years, for which it has had to pay penalties of USD 88 million and USD 54.6 million respectively. As a result the company was debarred from receiving loans from the Japan International Co-operation Agency for nine months starting from March 2014. , transmits Serbia-energy.eu

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