A group of 20 Spanish NGOs, including our member Observatori del Deute en la Globalització (ODG), calls for a non-reimbursement of the debt provoked by the Castor project. This debt accumulated for a failed project is to be transferred to Spanish citizens as of January 2016 via their gas bills. It is estimated that the total amount to be reimbursed by Spanish people would represent over €4,700 million to be paid over 30 years.

Through a Statement and a satiric video, the signatories denounce a massive fraud and demand to freeze the payment of the debt generated by a compensation that should never have been approved. The campaign #NoPagoCastor (“I do not pay Castor”) comes into the context of the legislative elections in Spain and asks political parties to take their responsibilities and freeze the repayment of this debt.

If national responsibilities are to be established (trials are currently taking place in Spain for violating environmental laws, and the Spanish Supreme Court has recently ruled against the environmental impact assessment of the Castor gas pipeline), at European level the supporters of the project have not claimed any responsibility for the fiasco of Castor.

Indeed, the European institutions played a key role in enabling the project to see the light. In July 2013, the European Investment Bank (EIB) and the European Commission hailed the first project to be financed under the Europe 2020 Project Bond Initiative. The honour of being the first such pioneering investment fell to the €1.7 billion Castor underground gas storage plant off Spain’s Mediterranean coast. The EIB provided a €200 million letter of guarantee under the Project Bond Credit Enhancement scheme and an additional €300 million provided as senior bonds.

But when the situation on the ground started to deteriorate – with the Spanish government being forced to halt work at the plant after more than 500 mini earthquakes in the area had been detected in less than a month – the European response to the disaster was particularly weak.

To make it short, the EIB got a way out of the fiasco via getting its money back. In a statement on its website on 20 November 2014, it confirmed that „Senior Bonds have been fully repaid. The €200 million letter of guarantee (PBCE) is expected to be discharged accordingly“. Instead of questioning its support to this failed project and reflect upon this disaster in the way it implements the Project Bond Initiative, the EIB went ahead with the pilot phase of the Initiative.

Commissioned by the Commission, an interim evaluation of the Project Bond Initiative was carried out by the consultancy firm EY. It concluded that the Castor project was a financial success for a number of reasons, including: „The successful financial close demonstrated that bond credit enhancement can support long-term investment in periods of economic turmoil and in difficult markets, such as Spain.“ In parallel, the evaluation claimed that „without the participation of the EIB and the PBCE, the bond issue would most certainly have not taken place“, therefore confirming the key role played by the EIB in enabling the Castor project to see the light.

When, in its annual resolution on the EIB, Members of the European Parliament criticised the Project Bond Initiative and condemned the EIB for financing “infrastructure projects that turned out to be unviable and unsustainable”, the EIB did not take those criticisms into account. Instead, it kept praising the pilot phase of Project Bonds, and the European Commission even promoted risk-sharing mechanisms similar to project bonds at the core of its new Investment Plan for Europe.

As far as European institutions are concerned, two main actions need to take place:

1/ In the case of Castor, civil society organisations claimed the seismic risk was known in advance and should have been investigated better, and public participation in the project was lacking. Therefore, the due diligence carried out by the EIB should have identified the risks related to the project. In this context, the EIB needs to ensure more stringent due diligence around the projects it finances, especially when large infrastructure projects that are likely to have harmful environmental or social impacts are concerned.

2/ The Project Bond Initiative (PBI) is structured as such that the public entity absorbs most of the risk in order to attract private investments. As a consequence losses are socialized while profits are privatised. Linked to that, the mechanism allows refinancing risky projects that failed to attract investments in any other way, and as a result the risk of failure and thus public debt is much higher. The Castor project also showed that transparency remains a huge issue: most of the details about the contractual agreement, clauses and absorbed risks remain secret.

Therefore, the European Commission should re-assess the financial, social and environmental impact of the PBI on EU citizens during its evaluation of the pilot phase which will take place in 2016. Such full-scale evaluation of the initiative should happen in connection with an open and inclusive public consultation enabling not only market actors but also public authorities and civil society to voice their concerns about the roll-out of the initiative and the use of public resources. Finally, we call for more democratic oversight over project bonds through greater involvement of the European Parliament and possibly the European Court of Auditors.