This project finances the development, construction and operation of a 280MW hydropower plant in the northwestern Svaneti region of Georgia. Project components include:
As this project has several co-financiers, the Asian Infrastructure Investment Bank (AIIB) has chosen to apply the European Bank for Reconstruction and Development’s (EBRD) Environmental and Social Policy framework. Under the EBRD’s policy Category A is assigned to a project only if it is likely to have “significant adverse environmental and/or social impacts and therefore require an environmental and social impact assessment.”
Although the AIIB is adhering to the EBRD’s risk categorization, the assessments undertaken do not list any specific safeguards that have been triggered. Project documents indicate that in addition to the EBRD’s safeguards, the project must also comply with the ADB, IFC, and EIB’s policies. There are several social and environmental impacts identified by project documents:
Land Acquisition and Resettlement: According to the Social Impact Assessment (SIA), acquisition of the land required for the project will affect the land, non-residential structures, trees and annual crops of 80 households, including 28 vulnerable households. As this accounts for one fifth of the households living in the Nenskra and Nakra river valleys, the project is “considered to be high impact”. However, the ESIA states that “there will be no permanent physical displacement”. In the Chuberi village, 5% of the valley’s arable land and 2% of pasture land will be acquired for the project, of which 0.8% and 0.16% respectively will be affected permanently. The pasture sites of Kvemo Memuli, Mashritchala, and Lagiri will be affected.
Economic Displacement: The SIA states that 80 households will be affected by economic displacement, including 2 of the households affected by the land acquisition. The displacement arises from the impacts on the pasture lands, agriculture, and logging.
Effects on Biodiversity: Project documents note impacts on the microclimate resulting from the Nenskra reservoir. However, while the 2015 ESIA recognized significant changes in the Nenskra and Nakra valleys from the microclimate point of view, it is absent from the supplementary documents disclosed in March 2017. According to the document “its [reservoir’s] effects on the climate will be substantial in spring, when the ice starts melting and breaking, and in late autumn, before ice phenomena begin. Sharp difference between water and air temperatures and strong wind will intensify evaporation. Evaporated moisture will cover buildings and fruit trees in a form of hoar frost and damage them. The damage caused by early frosts is graver as it will damage buds and sprouts, and ultimately result in premature aging, fruitlessness and dying of plants. For the people, that experience from rheumatism and/or need treatment respiratory or cardiovascular diseases the health condition will further aggravate.”
Effects on Cultural Heritage: Two private cemeteries fall inside the project area.
There is great opposition to the Nenskra project, which affects the Svan communities’ traditional lands. Some risks to human rights include:
According to the Stakeholder Engagement Plan (SEP), consultations took place with the Chuberi community, Georgian environmental NGOs, and the Mestia Municipality from 2011 to 2012 following the relaunch of the project. Follow-up consultations were undertaken from September 2015 to December 2016 informing the present ESIA in various locations including Chuberi, Naki, Mestia, and Tbilisi. The SEP states that these consultations involved discussions on compensation.
The Project cost is estimated to be US$1,083 million and will be financed through 30% equity and 70% senior loans. The Bank is contemplating provision of a senior loan of US$100 million. The Project will be co- financed by ADB, EBRD, EIB and KDB for up to US$758 million, with the balance covered by equity.
JSC Nenskra Hydro is a special purpose vehicle that has been established by a consortium composed of Korean Water Resources Corporation (K-Water), the Partnership Fund (a Georgian investment fund), and the Georgian government. According to the EBRD, after the project has been constructed, Nenskra Hydro will have ownership of the project for 36 years, while K-Water will be the majority owner of Nenskra Hydro, with the Partnership Fund holding a 10% stake. Nenskra Hydro’s website states that their “strategy framework stipulates that all the projects are implemented in agreement with the local population, civil society, local governing bodies, and with their intensive involvement into project execution.”
K-Water is a Korean company that is 91.5% owned by the South Korean government, and 8.5% owned by the Korea Development Bank. A member of the UN Global Compact, K-Water has previously received financing from the IFC and the World Bank. However, media articles report that the South Korean National Audit and Prosecution agency scrutinized K-Water “after it was discovered that the dams it built in four rivers had been done without any assessment of the local communities and had also damaged natural resources” in Thailand. K-Water has reportedly caused environmental damage and social conflict, and have experienced resistance from local people in implementing their projects.
Salini Impregilo is an Italian firm that has been contracted to design and construct the project. Also a member of the UN Global Compact, Salini Impregilo is listed on the Milan stock exchange and is a diversified corporation with activities cutting across sectors. In 2016, NGO Survival International filed a complaint to the OECD’s Italian National Contact Point against Salini Impregilo over the construction of the Gibe III dam in Ethiopia on Lake Turkana, the effects of which impacted 300,000 tribespeople along the lake. They have been accused of failing to seek free, prior and informed consent, and leaving thousands of people to face starvation. Salini Impregilo has also come under fire for abuses linked with the Grand Ethiopian Renaissance Dam, also known as the Grand Millennium Dam. These abuses included death threats against NGO International Rivers, repression of civil dissent, and lack of consultation. Additionally, questions have been raised about the structural integrity of the firm’s work, with media outlets reporting concerns about the construction of the viaduct of the Sydney Metro Project in Australia citing “cracking”. Romania’s highway company has also filed a criminal complaint against Salini Impregilo for its work on the Sibiu-Orasie highway.
This analysis has been prepared in partnership with CEE Bankwatch and the NGO Forum on ADB (NGO Forum). CEE Bankwatch is the largest network of grassroots, environmental and human rights groups in central and eastern Europe monitoring public finance institutions such as the European Bank for Reconstruction and Development, European Investment Bank, Asian Development Bank, and others that are responsible for hundreds of billions of investments across the globe. The NGO Forum on ADB is an Asian-led network of civil society organizations, based in Asia and the Pacific region who monitor the Asian Infrastructure Investment Bank and the Asian Development Bank.
For more information, please contact David Chipashvili at email@example.com.
Bank Contact Points
AIIB: Seung Myun Lee
Project Team Leader/Senior Private Sector Operations Specialist
Tel: +86 10 8358 0136
JSC Nenskra Hydro: Youngtak Choi
Tel: +995 322 43 0419
PROJECT-LEVEL GRIEVANCE MECHANISMS
Project documents state that JSC Nenskra Hydro is mandated to implement a project-level grievance mechanism which can be accessed on their website, http://nenskra.ge/.
ACCOUNTABILITY MECHANISM OF AIIB
In addition, the AIIB has a Bank Oversight Mechanism. According to AIIB's policies, "people who believe they have been or are likely to be adversely affected by a failure of the Bank to implement the ESP may also submit complaints to the Bank's oversight mechanism in accordance with the policies and procedures to be established by the Bank for such mechanism." However, at the time of writing, it is unclear what the exact scope and function of this Oversight Mechanism will be.