Weekly Monitor, 1 October 2010
Games around hydropower plants
The top authorities' battle to build hydropower plants on the Moraca River is entering its final phase. This is obvious from the sharp tones of Prime Minister Milo Djukanovic and his economic guru Veselin Vukotic. "Decisions on development of new energy sources must be made quickly and resolutely because, otherwise, energy can become a major barrier to development. This requires the use of foreign investment and domestic resources, "said the Prime Minister at the Milocer conference.devoted to energy and development. Clearly: we have a fast river, the foreign investor money and that's power. The details - how much and/or who will benefit from that business and what will happen to the environment - we will find out, I guess, when it's too late. As has happened with the Aluminium Combine and the Steel Plant. The Prime Minister has pointed his finger at those who question the whole business: "The less compentent the part of the society, the more interested and impassionate it is for participating in discussions about which it knows very little. In Montenegro, everybody is an expert in energy, in environment, in everything". Those who had complaints, criticisms or questions related to the construction of hydropower plants on Moraca would now probably need to shut up. And that, at a crucial moment. In the midst of public hearings on the Draft Concession Act, one of the key documents for decisions on the use of the Moraca River hydropower potential. Less Democracy: Professor Veselin Vukotic joined in the crackdown on useless critics: "In the field of development decisions, there should be more meritocracy than democracy. It must be more the rule of knowledge and vision, as opposed to ignorance and speculative expectations. Power industry is a good example of our speed in decision making – the discussion on construction of hydropower plants has lasted 30 years, "said Vukotic. And he regrets that we still don't have them. "It is not true that fruitless discussion on hydropower development is on for 30 years and that this is delaying their construction" said for Monitor Dejan Mijovic, Forum 2010 Coordinator for Economic Policy and Entrepreneurship. He explains that during this period former and current authorities launched four tenders for these plants, but none succeeded because no one wanted to finance the project. "That something is wrong with the project's economic and commercial viability, proves recent statement of Vuk Hamović, owner of EFT, the largest regional trader and investor in the energy sector, who is certainly not uninformed " Mijovic
explains. Hamović said recently that his firm's analysis showed that Moraca power project has "certain commercial weaknesses" which prompted EFT to withdraw from the project. Who is useless: Darko Pajovic, Executive Director of NGO Green Home, says that after everything that happened in recent months with documents needed for the construction of four hydros, the Prime Minister should be well aware who actually doesn't know his job. "The real address where knowledge and skills should be checked are Djukanovic's associates. Those who adopted the bad and wrong documents, spent peoples' money, time and energy. From all this follows that they are the ones who do not know their job. " Pajovic adds that after all these worthless documents, we have now obtained the draft Concession Act, which is - disappointing. "Whenever we sought clarifications on previous documents, people from the government claimed that they will all be provided in the Concession Act. Unfortunately, it is now clear that the document does not contain a single key answer. Forum 2010 claims that the document is not in accordance with the Law on Concessions: "The published Draft Concession Act for Hydropower Plant Development on the Moraca River is incomplete, which represents a gross violation of the Law on Concessions and undermines the public debate on this crucial document, on the basis of which the tender concession should be launched. " And that is not the only flaw. Forum 2010 has compiled a number of shortcomings of this key document - it is not clear how much the project will cost taxpayers, even though the law explicitly requires that this figure be stipulated. The draft Concession Act does not contain the amount of state participation in the project, which was estimated to be in the range of several hundred million euros during the recent debate on the Draft Spatial Plan (DPP) and Strategic Environmental Impact Assessment (SEA) for Moraca River Basin". Also missing is the analysis showing whether the planned concession secures public interest, value for money, and the balancing of risks between the grantor and the concessionaire. Although its inclusion is mandatory, the text of draft concession agreement between the grantor and the concessionaire is not attached. The document only lists the main chapters that the concession agreement should include, but these chapters are already defined in the Article 43 of the Law on Concessions in greater detail than in the Draft Concession Act. Enigma upon enigma Although the Government repeatedly announced overl last several months that Draft Concession Act will address many unknowns – the document does not list the necessary measures to protect the environment and achieve energy efficiency. It is expected – that these will be proposed by the future concessionaire! "Too much space and too many options have been granted to the concessionare to decide on such important matters" said Darko Pajovic. He explains that this confirms NGO community's
assessment that Montenegrin energy sector is being managed by interest groups, rather than by the government. "Energy resources will not be created or used by Montenegro or its citizen, but by interest lobbies, "said Pajovic. Furthemore: "cost benefit analysis on the basis of which economic benefits and environmental impact of proposed technical solutions project could be estimated has not been performed, which makes the process non-transparent. " Dejan Mijovic says that it is most distressing to see how little, if any, respect there is for professionalism, the public at large and the recently adopted European laws. The Law on Concessions, for example, has been prepared after several years of expert support granted by the European Union, USAID, GTZ, OECD and World Bank, and adopted after consultations with the European Commission, " reminds Mijovic. But it is not enough to have a good European law. It should be applied, as well. What are the effects: Huge fees have been paid with taxpayers money to international consultants for preparation of the project documentation. Nonetheless, the recently established Mediterranean University has been retained to assess the economic effects of hydropower development. "This analysis and the basic parameters on which it is based was not published, so it is impossible to conduct a qualified discusssion on the economic effects of the power plant construction. However, from the reported results, one can already conclude that the analysis has exaggerated economic benefits and fully ignored the cost aspect, ie. negative consequences on the population and environment ", claims Forum 2010. Over the next days, all shortcomings of the Concessionary Act will come to the surface. But Forum 2010 warns that results of the earlier held public debate on SEA and DPP have still not been published. No explanation has been provided why the Technical solution I (high Andrijevo Dam) has been kept, despite numerous complaints heard during the public debate denied its validity. The concessionaire will have the freedom to propose in the bid his own technical variants that suit him. Forum 2010 notes that, pursuant to law, any new variant must undergo a public hearing before the tender. Criteria for evaluation of project bids are listed summarily, without specifying their relative weights. However, it is clear from the text that project bids will be evaluated on the basis of their respective energy contributions, which favors projects with greater number of large hydropower plants, regardless of their adverse impact on the population and the environment, explains Forum in its statement. Moraca Roads and Sides: Forum 2010 also claims that the estimated relocation of the existing Moraca highway has been significantly reduced without any explanation. In addition, instead of 100 km of new local roads that government representatives recently promised during the public debate, only 20 kilometers of local roads will be built in the Basic technical solution I, and 27 km
in the Basic technical solution II. Things are not easy for Djukanovic and his professionals. In their document, the minimum and maximum duration of the concession are not specified in accordance with Article 19, paragraph 3 of the Law on Concessions. Thus the possibility for a concession period longer than 30 years has been opened, which confirms experts' doubts in the economic viability of the proposed concession. "Therefore, and bearing in mind that the duration of concessions of up to 30 years is determined by the Government, and the longer term concessions by the Parliament of Montenegro, the proposed Draft Concession Act would have to be reviewed and approved by the Montenegrin Parliament", concludes Forum. However, Veselin Vukotic would not have it that way. He would give the government a free hand. No one should be allowed to mess up with them now that they are so close to the goal. And so many times to date, they have proved that they just know how to get there.