People Power in Romania stopped a mining project – Now the corporation is suing for billions of dollars
Recently, a colorful group gathered outside a World Bank building in downtown Washington, D.C. to defend a community 5,000 miles away in Romania. Most had never met each other but when each pointed to her or his hand-drawn sign it was smiles and nods all round. And before you knew it, they were chanting slogans together as if they had done this before, including one in the Romanian language: “Uniti Salvam Rosia Montana!”
Several Romanian citizens were joined at the demonstration by activists from the Center for International Environmental Law, the Institute for Policy Studies, Earthworks, the AFL-CIO, and other U.S. environmental justice organizations. All had come together to defend a place called Rosia Montana.
Nestled in Romania’s mountainous and resource-rich region of Transylvania, Rosia Montana is a pretty town with a history dating back 2000 years. This place, however, holds an ineffable importance that goes beyond its historical significance. Today, it is an inspiring example of how a group of stubborn local farmers fought for their homes, their community, their lands, and their cultural heritage in the face of an assault by a Canadian mining corporation, Gabriel Resources.
This corporation wanted to destroy Rosia Montana by turning it into Europe’s largest open-pit gold mine, posing a severe environmental threat due to the use of toxic cyanide. It was David against Goliath. Gabriel had the money, it had connections to the highest echelons of power, and it controlled Romania’s media via million-dollar publicity contracts. In Rosia Montana, they waged nothing short of a war — buying up vital communal infrastructure, such as shops, the local dispensary, etc. to close them down. They also offered money for homes and so divided the community, setting family members against each other.
Many locals gave in. But a group of property owners resisted. To them, a home and roots meant more than any money in the world. They ganged together, set up a powerful campaign,and sued to block permit after permit. And when they blocked the mine proposal from all legal corners, Gabriel’s shareholders grew impatient and ever more nasty. They pressured its partner in crime or joint venture, the Romanian government, to pass a law to fast-track the mine. Those refusing to leave could be quickly expropriated.
Luckily the locals’ 15-year-long struggle had not gone unnoticed. It had spread by word of mouth and later, via social media. In 2013, when the government proposed that illicit law, when everything seemed dark and bleak, an entire nation inspired by the stubbornness of Rosia Montana’s resistance came to their support.
Hundreds of thousands took to the streets until the government backed down. Together they won. This moment, known as “Romania’s autumn” was equivalent to a revolution, to a national awakening. People, whether young or old or urban or rural, realized that if you fight together, you can win together. The slogan that coined this moment is “Uniti Salvam Rosia Montana!” — united we save Rosia Montana.
That moment forever transformed the country’s political landscape, too. The spirit, the wit, the feistiness, the organizing, and the tactics used in 2013 catalyzed movements such as #rezist, which halted political attempts by corrupt politicians to weaken the judiciary’s independence.
You might think, “Cool! A happy ending! So what was all the fuss in D.C. last week about?” Good question. It’s about profit and how to make one when there isn’t even a millimeter of reason to make one.
Rather than admitting the gross injustices and illegalities they committed, Gabriel was very miffed that all their Corporate Social Responsibility endeavors, public relations exercises, mitigation, and you-name-it stunts didn’t result in a permit for their mine.
They now want their money back. And because they are greedy, they not only want compensation for what they already spent, but also what they hoped to make in the future with an operating mine. In 2015, Gabriel submitted a legal claim, demanding at least $3.3 billion and as much as $4.4 billion (the equivalent of about 2 percent of the country’s GDP). To do so, they invoked bilateral investment treaties between Romania and the UK. These treaties allow corporations to sue governments in international tribunals through an investor-state dispute settlement system (ISDS). The most-used tribunal for such cases is the International Center for the Settlement of Investment Disputes (ICSID), which is associated with the World Bank.
How long will Santander continue to profit from Polish coal expansion?
The Spanish bank’s use of ‘ESG loans’ for companies with fossil fuel expansion plans is part of a dangerous new trend
Poland’s fiercely pro-coal Law and Justice (PiS) party may have been returned to power following general election, but already a vigorous coalition comprising local and regional authorities, farmers, NGOs and grassroots groups, business associations and local communities has succeeded in thwarting the new government’s reckless coal ambitions.
Faced with vocal opposition from across the country to PiS’s proposed legislation, which would have allowed Warsaw to open new coal mines around the country without the approval of local authorities, yesterday the head of the Polish parliament threw out reading of the special mining bill during the final day’s session of the old parliament.
Should the government re-table the bill in the coming months of the new parliamentary session, it will only escalate tensions between Poland and the EU over climate policy and land the national authorities in further hot water with Brussels. Environmental lawyers in Poland maintain that the proposed mining law would violate EU law.
As this blog explores, with the Polish state’s gung-ho approach to coal intensifying, for how much longer can financial institutions such as Santander maintain their credibility as supposedly ‘responsible’ banks if they are prepared to continue funding Polish companies which are going all out to prolong and expand their coal fleets?
All in for coal
PiS officials have not been shy about disclosing one of the most pressing reasons for trying to introduce the new radical mining legislation, a highly unusual and controversial move even by the standards of the ‘Coal is King’ mentality so dominant in the right-wing party.
The mining bill was intended to assist development of the planned lignite open-pit mine at Złoczew, which stands to become the country’s deepest ever open-pit mine, would displace over 3,000 people and destroy 33 villages. A concession to open the Złoczew mine is being sought by the state-run energy group PGE to fuel its Bełchatów power plant for the next several decades.
Bełchatów, Europe’s biggest power plant, is notorious for being the continent’s single largest source of carbon emissions.
For PGE, with no coal phase out policy in place, no Paris compliant decarbonisation goals and a 91% coal share of power production (according to the recently updated Global Coal Exit List), steamrolling over public health concerns, people’s houses and completely disregarding the global climate imperative is somehow par for the course. Flying in the face of economic reality to just keep on digging and burning more and more coal would also appear to be part of the PGE business model, according to an analysis published last week by the Institute for Energy Economics and Financial Analysis (IEEFA).
Assessing PGE’s ‘all in for coal strategy’ since 2015 (not the strategy’s actual name, but coal and lignite have accounted for 76% of its €8.5 billion capital expenditure and acquisition investment so far over four years), IEEFA’s view is that the financial performance of the company has been ‘woeful’ and that the current, hugely coal-intensive pathway is financially ‘unsustainable’.
The IEEFA analysis found that PGE’s cost of equity has exceeded return on equity for at least the last four years, and that it has performed poorly when compared with European electric utilities that have tilted towards renewables.
Of PGE’s proposed Złoczew lignite, one of the report’s authors Gerard Wynn reckons, “It’s a distraction which would inevitably create huge losses, ultimately paid by energy consumers or the Polish state. The time has passed for energy companies to replace old coal with new coal.”
Some banks refusing to get out of Polish coal
Steering clear of coal – and companies like PGE still looking to develop new coal projects – has also got to be a top priority for commercial banks. Yet just over a year ago, Spain’s Santander, Italy’s Intesa Sanpaulo and Japan’s MUFG opted to back PGE’s ‘all in for coal’ approach with a loan for the company of close to €1 billion.
Based on the environmental, social and financial risks which PGE’s stubbornly enduring, and potentially legally suspect, coal activities pose, these three banks – all of which recently signed up to the UN’s Principles for Responsible Banking, requiring them to align their business strategies with the Paris Agreement in the next two years – must now be prepared to jettison their recalcitrant Polish coal clients and, indeed, other clients still set on coal expansion.
Seeing no palpable signs of a transition out of coal taking shape in its Polish clients, this is in fact what French bank BNP Paribas announced it is doing at its annual shareholders’ meeting in May this year. Another French bank, Crédit Agricole, has also recently laid down a marker for the banking sector by announcing its commitment to fully phase out of coal, including an immediate end to business with companies planning to develop new coal projects.
However, just as they were signing the Principles for Responsible Banking at a launch ceremony in New York in September, two of PGE’s bankers, Santander and MUFG, signalled that they are prepared to give the Polish coal sector further financial leeway.
The two banks have signed off on a PLN 2 billion (approximately €465 million) ESG-linked revolving credit facility agreement with Energa Group, a majority coal-dependent company involved in trying to construct the last new coal power plant on EU soil – the €1.2 billion, 1000 megawatt Ostrołęka C coal plant.
One of the justifications from Santander for this loan (for ‘revolving credit facility’ read ‘company credit card’) is that the agreement with Energa “prohibits the use of loan proceeds for coal power”.
Energa does have business in renewable energy. Yet, according to an anonymous European banking source talking to Reuters about Polish coal power financing trends, “Banks agree to provide financing for energy groups only on condition that it will be spent on distribution networks or renewables. But this helps the energy companies to find money for the coal projects.”
Energa needs funding generally – to buy back domestic bonds this week, and to pay back €500 million worth of Eurobonds (an issue previously arranged in 2013 by BNP Paribas, Bank of America and HSBC) in March next year. And mounting Ostrołęka C construction costs are looming for Energa. The company has ‘stranded asset risk within a decade’ written all over it, chiefly because of its Ostrołęka C ambitions.
But what of the ESG (Environmental, Social and Governance) criteria attached to this Energa loan, which Santander is trumpeting as a first in Poland?
The extent of the interest payable on the loan will be determined by the bank’s assessment of Energa’s “care for the natural environment, social responsibility and corporate governance”. If Energa continues to pump capital into Ostrołęka C – and that is its plan – then under the ESG terms its interest payments on this loan are likely to rise, and hence Santander will profit further.
The emergence of ESG marked lending by banks for companies with explicit fossil fuel expansion plans is a dangerous new trend. If banks like Santander want to encourage companies – like Energa – which are dead set on firing up new coal plants not to do so, the risk of a couple of interest rate penalty points is not going to cut it, especially where state-owned companies such as Energa (and PGE) are concerned.
Rather than profiting by penalising the likes of Energa with exotic new ‘green’ financial engineering, Santander and others should penalise these companies by not funding them at all. Profiting from climate destruction is never going to be ESG-compliant, as much as the finance industry may want to spin it.