The European Investment Bank has announced that it is no longer involved in Ethiopia’s Gibe III hydroelectric project, but insists it is based upon the Ethiopian government finding alternative funding and not feasibility results conducted earlier.
However, the institution’s renege of its previous commitment comes at a pivotal time since the project’s precursor, Gibe II, collapsed on February 5 after operations commenced on January 15. Chinese company Dongfang Electric Corp. announced in mid-May that it would invest $459 million in the Gibe III project taking over from Italian firm Salini Construction, which led to rumors that Ethiopia would reject funds from the African Development Bank (AfDB).
The rejection of the EIB’s proposed investment could lay claim to opinions expressed regarding Ethiopia’s hydropower sector. Lori Pottinger, International Rivers communications and Africa campaigner, told Alternative Energy Africa that while Ethiopia is becoming Africa’s hydro capital, the East African country is building dams faster than it can spend the power. Although the EIB is quick to announce its decision to withdraw its proposal is not based on studies that the Bank recently concluded, it would make sense that perhaps Ethiopia does not want to adhere to standards and requirements made by lending institutions like the EIB and AfDB.
The EIB had conducted a range of technical, environmental, and social studies and had secured capital to proceed with further studies. These future studies were set to focus mainly on the project’s impact to the downstream area, including Lake Turkana – the only remaining desert lake in the world. Chinese investment does not carry the same standards as other international financiers. Many Asian companies require fewer standards to be met such as environmental protection issues that other international groups demand. For instance, as seen in Democratic Republic of Congo and its JV with Chinese mining company Sicomines, the only stipulation was its refusal to pay the DRC until the project procured sufficient profit (Chinese Investment in Africa Faces Corruption Charges).
Plutarchos Sakellaris, European Investment Bank Vice President responsible for Africa, said: "The European Investment Bank is committed to supporting the energy sector across East Africa where technical, environmental, and social standards are in place and financing terms are agreed with individual project promoters."
While the EIB still throws its verbal support for the Gibe III, set to be complete in three years and generating 1,800 MW of electricity, the Bank’s studies on the project are yet to be released.
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