You make some promises and we make some promises. Your government gives us guarantees in order to minimize our lending risk. We give you the money. You do with it what you wish. This very cynical portrayal of the World Bank's lending practices unfortunately plays out much too often to be dismissed as mere cynicism. A 1994 World Bank loan to the Czech Republic's mostly state owned utility company, CEZ, is an unfortunate example of this lending philosophy. While the loan should have demonstrated the World Bank's potential for contributing positively to sustainable development, it has instead served as a clear illustration of the manner in which the World Bank's good intentions sometimes lead to disaster. The World Bank designated the loan of $246 million primarily to decrease the environmental impacts of electricity production in the Czech Republic, which at that time was based mostly on outdated lignite-fired power plants. The modernization program of fossil fuel power plants was officially completed in 1998. Since that time, by far the largest part of the CEZ investment portfolio lies in nuclear projects. CEZ's official investment plan for 1999-2006 shows a budget of $2 billion, 69% of which is aimed at nuclear development projects. Two of the five projects for which CEZ used the World Bank loan were directly connected to the highly controversial Temelin Nuclear Power Plant. One project connected the high-voltage transmission grid between Temelin and Chrast to the Prestice transforming station, and a second performed an audit examining the safety of the Temelin Nuclear Power Plant. This is in spite of the fact that in a 1992 report, the World Bank advised the Czech government not to proceed with Temelin.

  Construction of the Temelin plant started in 1985, but went through a re-evaluation process in the early 1990s after a democratic government took office. In 1993 the project was re-launched, with the original design of old Soviet VVER-1000/320 reactors to be upgraded with new safety and control systems provided by the Westinghouse Corporation. Temelin‚s planned capacity is 2,000 Megawatts (two reactors), and planned annual production is 11.3TWh. The power plant is situated in South Bohemia, 100 kilometers south of Prague and 60 kilometers from the Austrian border.

  Temelin‚s construction has become a symbol of economic failure. Originally budgeted at 35 billion Czech crowns ($1 billion), a series of cost overruns has rocketed the price up to today‚s estimate of 98.6 billion CZK ($2.8 billion), while an independent government commission last year listed its real price to be on the order of 117 billion CZK. Since 1993, it has also accumulated delays of more than 5 years. The principal reasons for cost overruns and delays at Temelin have been technical complications, the scale and impacts of which are constantly underestimated by the CEZ management.

  In spite of chronic problems and long series of cost overruns and project delays, the CEZ management has not been able to learn from the mistakes of the past. Again and again, with the announcement of each cost overrun, the top directors insist that the budget is final and no additional cost overruns will occur. CEZ has not been able to understand or admit the scale of the project‚s complexity, nor have they been able to take measures to improve the quality of the construction. Chaotic management results also from the fact that during the 1990s, the entire decision-making structure at the Temelin site changed several times. Similarly, there have been at least seven key personnel changes at the highest level of Temelin's management since 1990. All this makes it even more worrying that no environmental impact assessment of the project has ever been conducted. In March of 1999, a team of experts commissioned by the Czech Government released their study of Temelin and its ongoing problems. The study highlighted many reasons to cancel construction of the plant, but did not make any explicit prescription for whether or not to continue construction. Under pressure from Friends of the Earth Czech Republic and Czech citizen groups, at its March 22 meeting to consider the study the Government agreed to give 6 weeks for further discussion and the development of two alternative scenarios for Temelin‚s future (one to close it, one to continue). In a May 12 vote of the 19 ministers in the Government cabinet, a slight majority of 11-8 voted to continue with the construction.

  The Temelin project in general has aroused active opposition both within the Czech Republic and abroad. Within the country, Temelin has been one of the most controversial environmental issues since the fall of Communism in 1989. The country's most influential environmental citizens‚ organization, Friends of the Earth, is best known for its long-running campaign to stop construction of the plant. Outside the country, Temelin has caused significant tensions between the Czech Republic and neighboring Austria, whose border lies only 60km from Temelin. At the time of the Government's vote last May, even President Vaclav Havel weighed in with his frustration over the project: "Over the years I have come to the conclusion that I cannot henceforth be silent on this matter, that I cannot stand idly by For decades we fought, or at least many of us fought, against the totalitarian system and against the centralization of all power. I do not think that we fought against the Communist government in order to have it be replaced by some peculiar, more hidden and more inconspicuous dictatorship of a single company, even one as respected as CEZ CEZ has deceived us nine times. Nine times they quoted us a price and start-up date for this power station which later proved to be false. I do not have any reason to believe CEZ. I have been lied to 9 times. I do not know why I should believe them in the 10th case."

  More recently, a coalition of more than 150 civil society groups, ranging from national environmental groups to local historical heritage conservation associations, from the country‚s largest humanitarian aid foundation to cancer-prevention advocates, has formed to demand a national referendum on the question of Temelin before the plant is allowed to start operation. The Prime Minister had promised a referendum on Temelin before the last elections, but since taking power he and his cabinet have ignored the call for a referendum. Meanwhile, in the past two years CEZ has frantically stepped up its pace on construction of the plant to be ready for a scheduled first fuel loading in July 2000, causing environmentalists to worry that safety checks are being bypassed. Evidence has recently surfaced proving this to be the case, and that the shortcuts taken and potential safety problems are even worse than originally feared. Leaked internal documents describe problems that will increase the danger of a nuclear disaster during startup and commercial operation. The documents also reveal that the national nuclear regulator SUJB is not independent, but rather helps to find "special solutions" for serious technical irregularities. In the case of certain unsatisfactory test results, standard testing procedures were exchanged for non-standard by modifying documentation.

  Concerned about how the World Bank loan enables CEZ to complete the Temelin project and pointing to the contract violations as well as the breach of the Bank‚s own no-nuclear policy, local CEE Bankwatch member Friends of the Earth Czech Republic raised the issue with the Bank and asked it to take steps to cancel the loan or at least to force CEZ to abandon its nuclear program. The initial response of the Bank in 1998: as far as we know, the money is all going to modernization of the coal power plants. When the potential contract violations became reality, Friends of the Earth decided to pursue the case more strongly, and prepared a study documenting how the World Bank loan contributed to the Temelin project. This time, in a meeting with CEE Bankwatch Oil and Climate Coordinator Petr Hlobil, Bank staff responsible for the loan could not deny any of the findings in the study, but voiced a different interpretation of those findings. They stressed how successful they felt the project had been, and tried to explain away the two projects directly linked to Temelin by giving vague excuses that the audit was part of a necessary sector-wide audit, and that the grid link was a necessary upgrade to connect that region.

 The World Bank has often been criticized by nongovernmental organizations and community activists over the years as blindly dishing out loan money without adequate controls on how it is used and by whom. This, these critics say, is one of the reasons why the World Bank‚s self-proclaimed noble goals have failed so often over the years. The Temelin case is one more piece of evidence that this is true.

  Along with other loans that CEZ has received in recent years-and many of these lenders also claim that none of their money went toward nuclear projects-the World Bank‚s loan allowed an otherwise fund-strapped CEZ to push forward with an investment plan which focuses on nuclear power. This nuclear-based energy strategy creates a safety threat for Czech citizens and those of neighboring countries, and leaves a legacy of nuclear waste for future generations. Just as seriously, it has sent the Czech economy backwards rather than forward onto a more modernized, efficient path to economic development. This is something that the Czech economy can ill afford after several years of recession, and with incorporation into the more competitive and efficient European Union market looming in the near future.

  The World Bank would like to look at the Energy I loan as illustrating its potential to contribute positively to sustainable development. However, the Energy I loan instead clearly illustrates why the World Bank‚s good intentions too often lead instead to disaster. This lesson is a crucial one in the present context, after the World Bank has spent much of the past decade developing policies and procedures that attempt to be more open and to take social and environmental factors into account. The World Bank can only make itself credible if it takes steps to follow in practice what it says in words.