The Sendou project has experienced dire circumstances that have badly influenced the environmental and social performance of the project.
The Sendou project has experienced dire circumstances that have badly influenced the environmental and social performance of the project. The ESAP was postponed in the context of shareholder disputes and shareholder changes that the project has undergone since its inception in 2010, which in the early stages resulted in a lack of leadership at project level.
Our client was obliged under FMO’s loan documentation to make improvements in the fields of human rights, environmental standards, and corporate governance. Prior to the first disbursement of the loan in 2013, we included the Environmental and Social Action Plan (ESAP) in the Common Terms Agreement (CTA). CES was not able to comprehensively address the environmental and social (E&S) issues, such as monitoring of ambient air quality, marine water and ground water. Because of shareholder disputes, the second disbursement was put on hold. The project was at a standstill throughout 2014 and most of 2015, during which the E&S issues also remained outstanding. The ESAP became a precondition for the second disbursement scheduled for 2015.
It was only when a new controlling shareholder - Quantum Power - entered the project in October 2015, we believed that progress would be made. However, many issues including urgent tight construction deadlines and budgets needed to be addressed, causing challenges for the new shareholder. To guarantee the project’s continuance, FMO honored the request by the new shareholder for a temporary waiver of the ESAP actions prior to the second disbursement. The negative consequences of a failed project were deemed to exceed those of a temporary delay in satisfying pending ESAP items. In other words, priority was set to make sure that the power plant would function, before meeting our E&S standards. These are hard decisions to make; should we press on E&S issues while the future of the project is still unclear, with the risk of job losses and the total discontinuation of the project?
The construction is finalized but the project hasn’t been operational since July 2019 and is still in breach of FMO’s E&S standards. Before the operational shutdown in July 2019, the plant had been performing below capacity with frequent outages. Diverging views on how to remedy the technical issues, triggered a new shareholder dispute, which delayed finding a solution for stakeholders. Without an agreed, common strategy among stakeholders (sponsors, lenders and Senelec), it makes it very hard for the company to invest in the outstanding E&S issues.
|Investigation into fraud allegations
In 2019, FMO and our co-lenders were made aware of fraud allegations against Mr. Suzor and entities owned by Mr. Suzor, the original developer of CES. FMO’s Compliance team was immediately notified, and we followed guidelines set out by our Compliance team. FMO, together with several of the co-lenders, have appointed Kroll to carry out an independent review of the allegations. The Kroll engagement and inquiry are ongoing. The travel restrictions due to COVID-19 form a delaying factor.