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EBRD resolves conflict between Ukrenergo and Ukrainian villagers

By Mike McDonough

Thanks to the EBRD’s intervention, a David and Goliath struggle pitting a village community near Odessa against Ukrenergo, Ukraine’s national energy transmitter, ended with the state-owned giant listening to its tiny opponent and reaching a settlement that satisfied both sides.

“This was a long, difficult and exhausting project,” says Alexandra Antsugai, a Principal Environmental Specialist at the EBRD, referring to the power line deal at the source of the dispute. “But in the end, it showed that you can make a big company with a Soviet legacy think about the impact its actions are having on local people and engage with them.”

The project in question was a deal signed in 2005 to build a new high-voltage power line covering a 124-kilometre stretch between Adjalyk and the village of Usatove in the Odessa region of southern Ukraine.

As well as cutting energy losses and vitally improving the reliability of Odessa’s power supply, the EBRD’s €26 million loan was aimed at helping Ukraine integrate with the energy markets of the European Union.

Furthermore, this was Ukrenergo’s first high-voltage line construction project involving an international financial institution and using EU-based environmental policy.

In keeping with EBRD practice, an Environmental Impact Assessment was drawn up based on the proposed power line route. This found no major environmental problems and an extensive public consultation by the EBRD revealed no objections to the project.

When it came to building the section of line near Usatove, however, Ukrenergo met with legal obstacles that forced them to change part of the route they had agreed with the EBRD. So the power company decided to build the remaining segment of line along a 13-kilometre corridor where it already had another line dating back to 1983.

Ukrenergo, however, didn’t consult the EBRD about the new route. What’s more, combining the new line with the 1983 one in a double-circuit line involved building new pylons that were far bigger than the existing ones. Like their predecessors, these pylons were located very close to the houses of residents in the villages of Usatove and neighbouring Nerubaiske.

Despite this, Ukrenergo began building the new stretch of line in 2009 without asking local people for their opinion. Villagers, already anxious about abnormally high cancer rates in the area which they blamed on the proximity of different high-voltage lines to their homes, were incensed at the company’s actions.

They clashed with police officers brought in by the local authorities to ensure the construction work could go ahead.

“When we heard what was happening in Usatove, we suspended the project, put a halt to the preparation of several other much bigger deals with Ukrenergo and sent the company a strict reprimand,” says Olga Yeriomina, the EBRD banker in charge of the deal. “It was a nasty surprise –but we immediately began looking for a solution.”

Working together with EBRD colleagues in Ukraine and London, Ms Yeriomina and Ms Antsugai persuaded Ukrenergo to start a dialogue with villagers. After six months of negotiations, the parties agreed that Ukrenergo would temporarily operate the new, contested line whilst looking for an alternative route that bypassed residential areas.

“Until then, the concept of consulting the public on its decisions was alien to Ukrenergo,” says Ms Antsugai. “But they came to see that, by following the EBRD’s recommendations and Environmental and Social Policy requirements, it’s possible to resolve conflicts and avoid delays.”

Technical cooperation funds were used for a health impact assessment and for work by independent consultants on finding alternatives and monitoring the consultation process for the new route selection.

As a result, a solution was found that all the parties were happy with. Ukrenergo built a new bypass section of the line at their own cost.

The contested 13km section of the line going through the villages was switched off on 22 August of this year. Electricity to the city of Odessa started being supplied via the new line outside residential areas. Work to dismantle the old pylons is underway.

“This project highlighted the valuable role the EBRD can play in our region. If we hadn’t been involved, the line would still be there,” Ms Yeriomina says. “We were the only ones who had influence over Ukrenergo and were able to make a difference.”

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