Green groups oppose Deripaska firm's listing
Eric Ng and Toh Han Shih
A Russian environmental non-governmental organisation, Rivers Without Boundaries, and other Russian NGOs including Greenpeace Russia, will today present a petition to the Hong Kong stock exchange to block the coming initial public offering of EuroSibEnergo (ESE).
ESE is a Russian electricity producer owned by tycoon Oleg Deripaska, who also owns aluminium company Rusal which listed in Hong Kong 14 months ago.
'We hope the exchange will look into the immense risks we have listed and block ESE's offering. We are prepared for a long campaign internationally and in Russia. If Hong Kong exchange officials do not heed us, we will continue working with investors to expose the harmful consequences of dealing with such irresponsible companies,' said Eugene Simonov, co-ordinator of Rivers Without Boundaries.
The NGO is concerned about ESE's plan to use the Russian rivers Amur, Lena and Yenisey for electricity exports to China, Simonov said.
'We advise IPO managers that investing in ESE is too environmentally, socially and politically risky, and these hydropower projects must be dropped. We would like investors not to invest in ESE until it changes its environmental and social policies and provides transparent plans which guarantee public involvement.'
On February 28, ESE started pre-marketing its Hong Kong listing, which aims to raise at least US$1 billion, Dow Jones reported, citing unnamed sources.
However, a person familiar with the deal said the Hong Kong listing would not happen until summer 'at the earliest' since institutional investors has not shown enough interest.
In November last year, the company shelved a plan to raise up to US$1.5 billion in Hong Kong because of weak market sentiment.
China Yangtze Power, the Chinese state-owned builder of the Three Gorges Dam, and ESE plan to invest US$4.6 billion in a 50-50 joint venture to build power plants in Siberia to supply electricity to China and Russia.
The joint venture, a Hong Kong-registered company called YesEnergo, will build two hydropower plants with a total annual generating capacity of 1.7 gigawatts and one 1.2 GW natural gas-fired plant. The gas-fired plant is expected to start generating power by 2016 and the hydropower plants by 2018.
One of the largest hydropower companies in the world, ESE generates enough energy to power much of eastern Siberia, according to the firm. Under a deal between Russia and China, Russia aims to export 60 billion kilowatt-hours of power to China in 2020, from a billion kWh last year.
ESE controls hydropower plants that have a negative environmental impact on Siberia, including Lake Baikal, alleged RWB.
'EN+ Group has a terrible environmental and social track record, which includes Rusal, a company that survives due to cheap electricity produced by ESE.'
EN+, a Russian conglomerate controlled by Deripaska, wholly owns ESE and controls Rusal.
ESE said: 'Hydropower is one of the cleanest energy sources and ESE is committed to ensuring its activities comply with environmental standards. Over 75 per cent of the electricity produced by ESE is generated at hydropower plants, which are among the most environmentally friendly facilities in terms of carbon footprint.
'We are striving to become leaders in environmental management.'
ESE also said it will conduct independent environmental and social impact studies on any planned new plants, and engage in open dialogue with stakeholders, including NGOs.
But Simonov said: 'I do not believe large dams on rivers are better than coal and fossil fuels in environmental conservation. Large dams ruin river ecosystems.'
Environmental NGO Probe International, while not part of RWB's petition, does support it.
'Thank goodness for markets. Stock exchanges in regions with rule of law and a strong, transparent regulatory environment force corporate accountability on otherwise untouchable companies like ESE and China Yangtze Power,' said Patricia Adams, executive director of Probe International, which studies dams in China.
'The proposed IPO by ESE raises so many red flags that private and institutional investors would be wise to stay clear of this offering. The proposed investment in power projects will suffer from cost overruns and inflame affected communities. The environmental harm they would cause is a known certainty,' Adams said.
'That the IPO sponsors are using the excuse of global warming to justify environmentally bad investments in hydropower will backfire when investors learn that the cure is worse than the disease of climate change,' she added.
Lin Boqiang, the director of the Xiamen University Centre for China Energy Economics Research, said: 'Large hydropower projects are by nature controversial in and outside China because of the difficulty in predicting the environmental impact.
'Some environmental groups will always oppose any hydropower project no matter what. The most important thing is that extensive environmental assessments are conducted and governments do their job in balancing various parties' interests.'
Requests to China Yangtze Power for comments went unanswered and Hong Kong Exchanges and Clearing's spokesman would not comment on individual listing applications.
Marshall Nicholson, global head of equity capital markets at BOC International, an adviser to ESE, did not reply to queries for comment.