On April 4, the Italian police confiscated €1.5 billion in assets from business tycoon Vito Nicastri – including 43 wind and solar power companies.
According to the police, Nicastri was laundering Mafia money through investments in new energy.
Although the major investors in new energy worldwide are governments and the private sector, “alternative investors” are appearing on the scene – including criminal gangs.
Chinese companies investing in Italy’s wind and solar power sectors were already aware they were in “heavyweight” company.
“The Mafia are deeply involved in the new energy sector,” said Jiang Zhe, CEO of solar power manufacturer and operator Up Solar. “And they are present in many sectors of the Italian economy.”
Although Up Solar built a 1MW solar power plant on the island of Sicily, most of the companies’ projects are in the north of the country. Jiang admits this is partially due to higher Mafia activity in the south. “As a foreign company all we can do is to do our best to avoid that, such as doing due diligence investigations as early as possible to find any hidden problems.”
Organised crime in Greece and Japan
And it’s not just an Italian problem. Evidence is mounting that organised crime is at work in the new energy sectors in numerous countries, including Japan and Greece.
Zhao Ran, vice-president of a Chinese new energy company, went to Japan three months ago in search of projects to invest in. But he had not anticipated the kind of “partners” he might meet.
“We were carrying out preliminary investigations of one project and an agent told us it was backed by a violent criminal gang, which scared us off.” Zhao explained that the Fukushima disaster spurred new energy development in Japan and organised crime joined in – although not as often or as deeply as in Italy.
ISA Intel, based in Sarajevo, carries out due diligence investigations in Europe, the Middle East and Africa. According to a report from the company, there is evidence that organised crime is also involved in the new energy sector in Greece.
Criminal gangs such as the Mafia like new energy, and even see it as a symbol of their “modernisation”, because of lucrative government subsidies and lax regulation.
Despite being one of the few European nations to lack a long-term energy strategy, Italy’s new energy subsidies are very generous. According to the president of GSE, the body responsible for new energy planning in Italy, initial calculations put new energy subsidies in 2011 at €8 billion. Quite a bit of that ended up in Mafia pockets.
Former Mafia boss Antonio Birrittella once told the UK media that the Mafia viewed government subsidies as a gift.
Chinese reaction to mafia influence
According to a report from Bloomberg New Energy Finance on overseas investments in new energy by Chinese firms, as of April 2012 centrally-owned state firms including Huaneng, Guodian, Guangdong Nuclear Power and the Three Gorges Corporation had made new energy investments of over $1.2 billion across Europe and North and South America.
Cao Yin, head of energy and power at consultancy Martec, said that while Chinese companies making actual investments in Italy were aware of the Mafia’s presence, their reactions would differ according to the nature of their investment. Some Chinese investors are almost used to dealing with organised crime.
“This kind of thing is actually a double-edged sword – sometimes it actually brings advantages, such as quicker government approvals. But unknown factors can create huge problems,” said one investor, adding that it also depended on the needs of those investing.
If they are simply buying a wind farm to sell on for a profit, investors may not be too concerned about who they are buying it from. But investors will steer a wide berth if they want to make a profit by actually operating the plant. “You can’t just reject a project because of criminal involvement,” said the same investor. “Business is business, after all. You just need to be more careful.”
Zhao Ran said that Chinese companies are most worried about their “special” partners coming up with unreasonable demands.
Salvatore Moncada, CEO of Italian energy firm Moncada, is a good example. He has suffered from Mafia intimidation on two occasions, and once spent 18 months under 24-hour police protection. His refusals to cooperate resulted in wind turbines being torched.
But of the Chinese companies spoken to, none reported this kind of intimidation.