World Bank Board of Executive Directors Discusses Inspection Panel Report on Power Sector Generation and Restructuring Project in Albania

Albania Power Sector Generation Press Release.pdf

WASHINGTON, October 22, 2009—The World Bank Board of Executive Directors today discussed a Management Report and Action Plan that responds to an Inspection Panel investigation of the Power Sector Generation and Restructuring Project in Albania.

The Power Sector Generation and Restructuring Project aims to expand and diversify Albania’s domestic power supply to meet the country’s rising demand for energy by building a new 97 MW diesel oil-fueled power plant.In recent years, Albania has suffered from electricity shortages, which have slowed economic development and led to frequent blackouts that affect people throughout the country.In 2002, the Government of Albania asked the World Bank to assist in arranging donor financing for anew thermal electric power plant about six kilometers north of the city of Vlora.

In May 2007 the Inspection Panel registered a Request for Inspection by the Civic Alliance for the Protection of the Bay of Vlora1 on behalf of local residents living in Vlora. The Request raised a number of environmental, social, cultural and economic concerns related to the Project as designed.It cited concerns that the project would “…destroy environment, tourism, safe fisheries, natural habitat, ecosystem, coral colonies as well as the unique historical and cultural significance of the entire Vlora Bay and Narta Lagoon.”

In its report, the Panel noted the importance of the Project in addressing Albania’s electricity needs. The Panel determined, however, that the Bank did not comply with several provisions of Bank policies on Project Appraisal, Environmental Assessment, Management of Cultural Property, and Economic Assessment. The Panel also found significant shortcomings in compliance with the Bank’s consultation policy requirements.The Panel, however, also recognizes that the plant has now been constructed and the focus on the facility should be directed to its future operation.

Werner Kiene, the Chairperson of the Inspection Panel, noted: “Looking forward, the Panel is pleased that Management agrees with the need to put in place a detailed oil spill response procedure before the power plant is fully operational. There is a need to ensure that the necessary equipment is procure d without delay, and to assist the Albanian authorities to develop appropriate administrative structures to allow rapid response to oil spills that would threaten Vlora Bay and its tourism industry. The Panel notes that the Bank has worked closely with the Government on development of a Territorial Planning Law and is pleased that Management recognizes the need for overall planning for Vlora Bay.”

Management appreciate s that the Panel also concluded that the plant will not exceed applicable air emission and cooling water discharge limits; will not adversely affect the nearby Narta Lagoon; and has not resulted in damage or destruction of any cultural heritage or critical natural habitats.A concern of the Panel was that a single consulting firm prepared both the feasibility study and the environmental assessment (EA), which is not consistent with the policy on environmental assessment that requires the independent preparation of the EA.Management has indicated that if future situations of this type must arise, not only will Management ensure there is an independent review of the environmental assessment by qualified specialists, Management will also seek from the Board a waiver of the specific policy provision.

The Panel raised concerns about the overall process of site selection and Management has agreed to better integrate review of environmental and social issues into such processes in future projects.Management also agrees that a thorough assessment of social issues and more extensive consultations should have been undertaken as part of the environmental assessment which would have allowed for an improved decision making and project implementation process. Regional Management has put in place measures to ensure social issues are fully take n into account in the preparation and implementation phases of future projects in the Europe and Central Asia Region.Management will also take measures to ensure that future environmental assessments for Bank supported projects define the potential zones of impact in a broader manner to allow for a more comprehensive understanding of issues.

Management presented an Action Plan for addressing the remaining issues identified by the Panel.The Board approved the Management Action Plan and it was agreed that Management will report back to the Board on the implementation of the Action Plan in six months time. Elements of the Action Plan include: focusing efforts to ensure that an Oil Spill Prevention and Response Plan is fully in place before the plant begins commercial operations; ensuring that state-of-the-art environmental monitoring continues at the plant with the participation of community representatives, and information is shared with civil society; and assistingthe Government ofAlbania (through an Institutional Development Fund grant) to strengthen its capacity to comply with the Aarhus Convention regarding access to information and consultation processes. Management also indicated that it will continue to engage the Government of Albania on improvements in territorial planning.

“Albania’s economic development pays a steep price for the country’s shortages in electricity supply,” said Philippe Le Houérou, World Bank Vice President for Europe and Central Asia.“But it is the Albanian people who pay the ultimate price – depriving them of power for light, space heating, refrigeration, and cooking, affecting their quality of life and their health, as well as restricting their access to education.We are working with the Albanian government to make this project the best it can be, and we are going to take up the lessons identified by the panel and apply them more broadly in our work.”

The total Project cost is estimated to be US$112.66 million. In addition to a Credit equivalent to US$25 million (SDR 16.9 million) from the World Bank’s International Development Association, the Project is being financed through an European Bank for Reconstruction and Development (EBRD) loan in an amount of US$37.5 million, and an European Investment Bank (EIB) loan of US$37.5 million.

For more information on the Inspection Panel, visitwww.inspectionpanel.org.

For more information on the World Bank’s work in Albania, visit:www.worldbank.org/al

Media Contact:

Tirana:

Ana Gjokutaj+355-42-280-655

Agjokutaj@worldbank.org

Washington:

Elena Karaban +1-202-473-9277

ekaraban@worldbank.org

InspectionPanel:

Luis Schunk +1-202-458-2500

lschunk@worldbank.org

1 The name Vlora (used in this report) is also frequently spelled Vlore and Vlorë. The three spellings are all interchangeable and do not signify practical difference.