China "Going Out"

Sinohydro ‘downgraded’ over accident record

Kelly Haggart
Probe International
August 31, 2006

Sinohydro, the Chinese company set to build a billion-dollar dam on the Salween River in Burma in partnership with the Thai utility EGAT, has been criticized in an annual performance review of state-owned enterprises for unspecified “safety or environmental pollution accidents.”

It is the second high-level public rebuke in recent years for China’s largest dam-building company. Sinohydro was fined along with several other firms in 2004 for shoddy construction work on Yangtze River flood-control structures, a scandal that was exposed in a scathing report by the National Audit Office.

A supervisory body operating under the State Council, China’s cabinet, delivered the latest reprimand after assessing the performance in 2005 of 166 state-owned enterprises (SOEs) affiliated to the central government. (The number of such companies, known as central SOEs, fell to 165 last week with the merger of two of the firms.)

“Four enterprises were downgraded because of safety or environmental pollution accidents, including China National Petroleum Corp. and Sinohydro Corp.,”    China Daily reported. “Six others, including China Guodian Corp. and China Datang Corp., were downgraded as a result of irregular financial practices or negligence in supervision.”

China Guodian and China Datang are two of the country’s “big five” state-owned power-generating companies. China Guodian has been involved in preparatory work for a string of dams planned for the Nu River, as the upper Salween is called in China.

The newspaper gave no further details of the companies’ accidents or financial irregularities, nor any indication of the exact grade any of the firms had received.

The State-owned Assets Supervision and Administration Commission, set up in 2003 to assess the management and financial performance of China’s central SOEs, grades the companies from A to E. In its latest review, 28 companies earned an A and 84 received a B, entitling their chiefs to bonuses worth 1.5 to three times their salary, along with other incentives, China Daily reported.

The people running the companies that received a D or an E faced a salary cut, a transfer or even dismissal, the newspaper said. However, the report did not say whether Sinohydro had received either of those grades, or whether general manager Fan Jixiang was to be penalized in any way.

Whether Sinohydro’s poor report card will have any impact on its access to capital for projects outside China, such as the recently announced dam-building joint venture on the Salween in Burma, is also not clear.

In June, Sinohydro signed an agreement with Burma’s military regime and the Electricity Generating Authority of Thailand to build a US$1 billion dam at Hat Gyi in Karen state. The first in a series of five planned hydropower projects, Hat Gyi would be the first dam to block the 2,800-kilometre-long Nu/Salween, the last major free-flowing river in Southeast Asia. The project has been widely condemned by human-rights and environmental activists.

Sinohydro (formerly China National Water Resources and Hydropower Engineering Corporation) is no stranger to controversy, and has worked on some of the world’s most contentious dams. These include Merowe, being built on the Nile in northern Sudan, Bakun in the Malaysian state of Sarawak, and the Chalillo dam, built by the Canadian company Fortis in Belize.

Back home, Sinohydro, which employs 35,000 people, has been involved in the construction of an estimated 80 per cent of China’s existing large and medium-sized dams, as well as many of those now under construction.

It has been a major contractor on the Three Gorges dam on the Yangtze River in Hubei province, as well as Ertan on the Yalong River in Sichuan, Xiaolangdi on the Yellow River in Henan, and the Manwan, Dachaoshan and Xiaowan dams on the Lancang (Mekong) River in Yunnan. The company is also involved in the Xiluodu dam being built by the Three Gorges Project Corp. on the Jinsha (upper Yangtze) River, which will be China’s second-largest dam after Three Gorges when it is completed in 2015.

According to the New York-based construction industry magazine Engineering News-Record, Sinohydro ranked 49th among the world’s top 225 construction contractors in 2004, up from 136th spot in 2000. (The rankings are based on annual construction revenue generated outside of the companies’ home countries.) In 2004, Sinohydro secured 27 projects in 15 countries, with a total value of US$903.8 million, up from US$113 million in 2000.

The Salween, where it forms the border between Burma and Thailand.

Recent Three Gorges Probe stories highlighted on the CDT website and news service:

Dai Qing: Boosting support to dam migrants is just a start
by Kelly Haggart and Mu Lan, Three Gorges Probe, August 27, 2006
Beijing’s decision to give 22 million farmers who have been displaced by dams a 600-yuan (US$75) annual subsidy for 20 years is seen by journalist Dai Qing as an official acknowledgement of the high social cost of such projects.

Three Gorges navigation woes set to worsen
by Kelly Haggart and Mu Lan, Three Gorges Probe, August 14, 2006
The delays that have plagued boats trying to get around the Three Gorges dam are set to worsen soon when one-half of the two-way shiplock is taken out of service for more than nine months.

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