Endesa to press ahead with Ralco

Agua Latina
October 12, 2001

Endesa announces that the Ralco hydroelectric power plant on the 240-mile long Bío Bío river, will go on-line December 2003, six months later than planned. EDC provided Quebec’s ABB Alstom with US$17-million in financing for generating equipment.

Endesa, Latin America’s largest private sector power holding, and controlled by the Spanish-owned Enersis-Chile, has announced that the Ralco hydroelectric power plant on the 240-mile long Bío Bío river 600 miles south of Santigo, the capital, will go on-line in December 2003, six months later than planned.

The delay was caused by unsparing rainfall in early July – and a consequent rise in river levels – which caused the collapse of a retention wall and the diversion of the river. The Executive Secretary of the Comisión Nacional de Energía (CNE), Vivianne Blanlot, has since stated that the delay will complicate connection of the plant’s 570MW, or an estimated 7.4% of comsumption, to the Sistema Interconectado Central (SIC), or main grid, because only 300MW of energy generated by small turbines could be connected to the main supply network by July 2003.

The setback adds to a catalogue of woes for the project. At the end of May, legal representatives, Liliana Díaz Vargas and Juan Montoya Inostroza, for the Hualqui Indian community claimed before the Appeals Court of Concepción that Endesa had shown “an unbelieveable lack of foresight” when it opened the floodgates of the Endesa-operated Pangue dam further downstream, after the river has risen to six times its normal level. The flow resulted in serious damage to Indian property in the Alto Biobío region, and the indigenous community is seeking compensation and insurance contracts. The company denies the claims.

Ralco, a US$715 million investment project, has been subject to controversy since its inception in 1995, and especially since Endesa won the project in June 1997 from the National Environment Commission. The major difficulty facing Endesa focuses on a legal contradiction. Under the country’s Electric Law, approved by the Pinochet regime, companies are allowed to develop hydroelectric projects.

In fact, the project could provide as much as 18% of the country’s power requirements, and so on paper, at least, the project ought to have been straightforward. Furthermore, the company has already invested US$154 million on Ralco, which at the end of January 2001 was 14% complete.

However, the project, according to some observers, such as the American Anthropological Association, infringes Chile’s 1993 Indigenous Law, which safeguards the rights of the Indian nations. The contradiction was not lost on Chilean President, Ricardo Lagos, who has stated that while he recognised the importance of the Ralco project, “we have to comply with indigenous legislation.”

In September 1999, Mario Carroza, the judge responsible for hearing the Ralco case at the Appeals Court of Santiago, “decided to suspend the construction of the hydroelectric plant after accepting a ‘precautionary measure’ requested by a community of Mapuche Indians whom believed they would be [adversely] affected by the alteration in the course of the river”, CNN News reported from Santiago (9th September 1999).

Notwithstanding this judgement, Endesa could proceed with complementary facilities such as roads and temporary installations – climatic conditions permitting – at Ralco prior to starting work on the main dam itself and the transmission line. Although the Santiago Civil Court ordered the company to stop work altogether last September, that decision was overruled by another Court of Appeals in last October, allowing work to continue in some areas.

At present, work on the main body of the plant, Chile’s largest, is presently about 40% advanced. The dam will have a 370m crest length and will be a 155m- (510 feet-) high structure. The reservoir will have a capacity estimated at 1, 222 million metres³ of water, and will flood an area of some 3.500ha (about 13 miles) of land.

This is Indian land.

According to the Indigenous Law, Endesa cannot begin construction without the written consent of all members of the community concerned. Thus, the company offered a compensation package to the community, which included improved education and health facilities and, apparently, better land elsewhere. The company’s package was accepted by 84 of the 91 familes – about 600 people (including 400 indigenous Pehuenches) – whom would need to leave their homes. These families highlight the fact that ENDESA has offered them improved prospects to escape poverty, and land equipped with irrigation systems and technical help to grow their own crops for a period of 10 years.

However, it has been rejected by others – albeit a tiny minority – and, apart from opposition from the ecological corner, two Mapuche women, two years ago, asked the courts to halt construction work at the plant. Why their rejection? In a letter dated 22nd August 1998 to the president of Chile’s Human Rights Commission, those Pehuenche opposed to the Ralco project emphasised the importance of the area’s spiritual value: “We, the Mapuche-Pehuenche are the keepers of knowledge about Itrofil Mongen [biodiversity], which allows the preservation of ecosystems, and which is the source of ideological and cultural inspiration for us……..”. Furthermore, over the last century, the land held by the Pehuenche has shrunk from 54 million ha to 30,000 ha.

Opponents further claim that the reservoir will seriously threaten aquatic life, impact downstream irrigation practices, flood native forest, increase access to logging, decrease downstream flow during low water periods, and undermine drinking water quality for nearly one million people downstream.

The controversial history surrounding hydropower development on the Bio Bío, dating back to the construction of the Pangue dam in 1986, seems to have engulfed everybody who is anybody from the president of the World Bank, senior Chilean politicians, and the two Indian sisters who were awarded prizes by the German government for campaigning on environmental awareness.

The 450-MW Pangue Dam was built with the help of a US$153 million loan from the International Finance Corporation (IFC), that arm of the World Bank which lends to private companies. Pangue was the first of six proposed dams to be built on the Biobío River. Ralco, is the second to be built and will function to slow siltation and regulate flow in Pangue.

The poor handling of the Pangue project’s social and environmental issues – for instance, opponents have long claimed Pangue and Ralco are interdependent projects – in other words, that a cumulative environmental impact assessment was required – the IFC continued to maintain that Pangue is a stand-alone project.

The whole affair led to sackings in the Chilean administration and the personal intervention of Wolfensohn, president of the World Bank, over such questionable environmental studies. This can only have aroused suspicion among some Chilean government ministers and local communities about promises of environmental wellbeing. Hence, CONAMA, the Chilean environmental protection agency, rejected Endesa’s environmental impact study on the Ralco project.

Despite the company’s December 2003 operations announcement, the Indian communities say they are planning to file suit against Endesa España in Madrid.

The Biobío River springs from the Icalma and Galletue lakes in the Andes, flows through steep and narrow gorges and forests of araucaria pine, passes through agricultural lands and cities, until it reaches the Pacific Ocean. Its watershed has a surface area of 24,260 square kilometers. Over one million people use the resources of the Biobío for drinking and irrigation water, recreation, and fisheries. And the jury, it would seem, is still out on its future.

Categories: EDC, Export Credit, News

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