ערשטער אי.יו. פּרויעקט קייטן פאַרלאָזן און וועט קאָסטן ספּאַין € קסנומקס ביליאָן

The pilot phase of the European Project Bond Initiative was launched by the European Commission and the European Investment Bank (EIB) in 2012 as an instrument to attract private investments for infrastructure projects to boost growth across Europe. Ironically, its first test case failed tremendously and will cost Spanish citizens at least EUR 1,4bn. Castor, an offshore gas storage facility on the Spanish coast, had the dubious honor to be picked as the first project to be financed through EU project bonds. After gas injections caused a series of hundreds of earthquakes in the region, the project had to be abandoned. According to a clause in the project’s contract, the Spanish government was forced to take responsibility away from the project’s developer for the repayment of the €1.4 billion bonds that were used to finance the Castor project.

“What was supposed to be a driver for growth turned out to be a driver for debt,” said Xavier Sol, Counter Balance director. “The responsibility of the EU is overwhelming. Socialising risk and privatizing profits is what dragged us into this crisis. The Castor failure proves again that a mechanism such as the Project Bonds Initiative cannot be a solution.”

According to Reuters the Spanish government appointed gas grid operator Enagas to reach an agreement with a group of banks to repay concession-holder Escal UGS. This is an attempt to avoid that the €1.4 bn would count against the already high public deficit at a time of austerity measures in Spain (the amount may increase to €1.7bn if financial costs and interests are included). The banks refinancing the debt would be compensated through future revenues from Enagas.

“The result remains the same. Whether through taxes or through increased gas bills, in the end it will be Spanish citizens paying for a failed project. The government is about to choose the worst option on the table,” said Monica Guiteras from Counter Balance/ODG in Spain.

Among those options were the creation of a 'bad bank' to manage the stranded assets  and a nationalization of the facility. In both cases ACS, the private promoter of the project, would at least carry part of the debt repayment. Civil society organizations regret that the government now seems to choose for the most costly option which would be carried entirely by the people of Spain.

Civil society organizations proposed an appeal in court to cancel the compensation requirements.  Alternatively also a moratorium on debt repayments while the case is being settled could be an option. Guiteras regrets that within the government “the political will is to be lacking to pursue these options”.

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