By Probe International

China’s Three Gorges Corporation vying to build world’s largest hydro project in Central Africa

Probe International
June 22, 2007

As China’s Three Gorges dam nears completion, the company responsible for building and financing the world’s largest dam is vying to construct an even more ambitious hydro project in central Africa.

Named after the Congo River’s powerful Inga rapids, the proposed Grand Inga scheme will have an installed generating capacity of 39,000 MW, which is more than China’s Three Gorges and Brazil’s Itaipu dam combined. The site is 225 km downriver from the embattled capital of the Democratic Republic of Congo, Kinshasa, and thousands of kilometers north of South Africa, the continent’s largest economy and a prospective buyer of Grand Inga’s massive output.
Promoters include the African Development Bank and the G8-funded New Partnership for African Development, who say that Grand Inga will produce enough power to industrialize southern Africa and export energy to Egypt and southern Europe.
Earlier this year, China’s Three Gorges Corporation president, Li Yongan, joined other big dam builders and power equipment suppliers at the World Energy Council forum on developing Grand Inga. The meeting took place in Botswana, the headquarters of a South African-led consortium that plans to develop the site. The consortium includes the South African power utility, Eskom, and its counterparts in the Democratic Republic of Congo, Angola, Namibia and Botswana.
Li Yongan presented the Three Gorges project as a model for developing Grand Inga on time and within budget. He said the US$30 billion Chinese dam project was financed using a mix of loans from state and international banks, bonds, stocks, hydro revenue and the Three Gorges Construction Fund, a special fee collected from electricity ratepayers since construction began in 1993. He noted that “a stable capital source is the important guarantee to the development of large hydropower projects.”
Grand Inga is expected to cost at least US$50 billion, not including the cost of local transmission and distribution in rural areas where the vast majority of Africans live without access to a power grid.
According to Eskom’s chief executive, Thulani Gcabashe, the entire scheme calls for 52 turbines – each with an installed capacity of 750 MW – and at least three long-distance transmission corridors: one running 3,500 km south through Angola and Botswana to South Africa, another west to Nigeria, and the longest one running 5,600 km north through the Central African Republic and Sudan to Egypt and southern Europe.
While Gcabashe pitched Grand Inga as a reliable and affordable source of electricity for the region worthy of international donor support, other presenters focused on the project’s high cost and the risks associated with getting Inga power to prospective markets – factors that typically discourage private investors.
Alessandro Clerici of ABB Italy, an engineer who worked on the first grid interconnections from two existing Inga hydropower sites to the Zambian power grid in the 1960s, said the cost of taking power from Grand Inga to distant markets would far exceed the cost of generation once capital investment, operation and maintenance and normal line losses of 15 to 20 percent are factored in.
Altogether, more than 70 percent of the project cost would go towards high-voltage transmission running through some of Africa’s poorest and most corrupt countries, making cost recovery a serious concern for would-be investors.
The risk of grid failure due to lack of maintenance and overheating is another problem, according to Gian Maria Ferrerro of SAE Power Lines, a global grid technology provider. The longest line running north to Egypt would have to cross more than 2,000 km of desert, which has never been done and is likely to push capital and maintenance costs higher than estimated.
The 3500-km line from Grand Inga to South Africa could cost as much as US$4 billion, which is more than the cost of building an equivalent generating capacity closer to where power is needed.
Given the project’s high costs and risks, Mr. Clerici, who is also an honorary chairman of the World Energy Council, said the only way to attract private investment is to get political and financial support for Grand Inga from multilateral development banks and other international institutions.
He also suggested that Grand Inga would have a better chance of success if energy-intensive industries, such as aluminum smelters, could be developed near the site.
Unlike China’s Three Gorges project, which forced the relocation of 1.2 million people, Eskom says Grand Inga will not require large-scale flooding or resettlement. However, African sources report that 8,000 people living near the Inga rapids were ordered to leave their land last year to make way for the next phase of development – and they were told not to expect any compensation or other forms of assistance.
Speaking at an earlier Inga conference held in Johannesburg last year, several community representatives reported that people displaced by the first Inga dams built in the 1970s and 1980s, Inga 1 and 2, received none of the electricity, water, health and education services promised by the government at the time.
As a result, citizens groups in southern Africa and internationally are raising questions about who will benefit from Grand Inga and what are the costs to ordinary Africans and their economies.
“Building dependence on a single huge power source may be good business for a few dam builders and grid technology suppliers,” says Probe International’s policy director, Grainne Ryder, “but at the expense of taxpayers and power consumers who would be better served by power plants built closer to where power is needed and on a scale better matched to their needs, whether that’s energy-intensive industries or rural villages.”
China’s role in the Grand Inga scheme is not yet clear. Eskom’s web site reports that Dr. Cao Guangjing, vice president of China’s Three Gorges Corporation, visited South Africa in 2005 and offered to help Eskom with financing and construction.
Meanwhile, international donor funding has started to flow for developing Inga:
  • Last year, the African Development Bank announced a US$14 million grant for further studies.
  • Canada has contributed C$1.3 million for a feasibility study of the 3500-MW Inga 3 project, the next phase of Inga development before Grand Inga. Using Canada’s Access to Information Act, Probe International has learned that the study by Canadian engineering consultants SNC-Lavalin was supposed to be completed last February. However, due to concerns about the lack of security in Kinshasa before and after last year’s elections, completion of the study was postponed until 2009.
  • In May, the World Bank approved a US$295 million loan to get the two existing hydro dams at Inga back in service. In its project appraisal report, the World Bank cautioned that large-scale development of the Inga site “will be throttled if DRC is unable to demonstrate its ability to ensure the operation of the existing Inga 1 and 2 facilities.” Maintenance of Inga 1 (351 MW) and Inga 2 (1424 MW) stopped in the 1990s when creditors stopped lending to Mobutu Sese Seko’s regime and Gecamines, the state copper company and Inga’s biggest customer at the time, stopped production. According to the World Bank: “All parts of the network deteriorated extensively in the 1990s as a result of extensive theft as the security situation worsened (both of physical components and via financial embezzlement), direct conflict damage, and most importantly a lack of maintenance and a dearth (sic) of replacement parts.” Today, the two power stations are working at about 40 percent capacity. The World Bank loan is supposed to be used for increasing the operating capacity of the two dams; adding a new higher capacity (400 kV) transmission line from Inga to Kinshasa to complement an existing 220 kV line; and connecting 50,000 new customers to the power grid in Kinshasa. Another US$31 million will be used to “enhance governance within the [DRC] utility” and “support further development of the Inga site.”
  • In addition to the World Bank loan, the African Development Bank and European Investment Bank are expected to approve US$100 million and US$94 million respectively, for a total Inga loan package of US$489 million.
The only private investment at Inga so far comes from Canadian company MagEnergy, a subsidiary of Toronto-listed MagIndustries. MagEnergy is investing US$110 million to repair four of Inga 2’s eight turbines. In return, the state utility has guaranteed MagEnergy 120 MW worth of capacity for powering its magnesium smelter 200 km west of Inga at Pointe-Noire, in the neighbouring Republic of Congo. MagEnergy is backed by South Africa’s Industrial Development Corporation, a state-owned bank with several major mining investments in the DRC.
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Notes
1. The presentations made on Grand Inga by Three Gorges Corporation’s Li Yongan, Eskom Chief Thulani Gcabashe and others at the World Energy Council forum on March 16-17, 2007 in Gaborone, Botswana can be downloaded from the World Energy Council web site at www.worldenergy.org

2. SNC-Lavalin (formerly two separate Canadian companies SNC and Lavalin) co-authored the Canadian-financed Three Gorges project feasibility study that was used by the Chinese government to justify construction and attract international financing for the project. The study, obtained by Probe International using Canada’s Access to Information Act, was found to be so fundamentally flawed that Probe International submitted complaints to Canada’s professional engineering associations, accusing SNC-Lavalin and its co-authors of professional negligence, incompetence and misconduct as defined by the engineering code of professional ethics. The full text is available at Probe International’s web site in Damming the Three Gorges: What Dam Builders Don’t Want You to Know (Earthscan, 1993): http://www.threegorgesprobe.org/pi/documents/three_gorges/Damming3G/appendix-b.html [PDF]

3. SNC-Lavalin was the first major Western firm known to have been punished for fraud by one of the giant international agencies that finance development in poor countries. Read the Globe and Mail article here: https://journal.probeinternational.org/2004/06/22/snc-barred-bidding/

4. World Bank, Regional and Domestic Power Markets Development Project, Project Information Document No. AB2795, Appraisal Stage, February 2007, available at www.worldbank.org.  Also, see Probe International’s letter to the World Bank urging Canada’s representative at the World Bank to oppose the Inga loan until such time as the people adversely affected by Inga 1 and 2 have been fairly compensated:  https://journal.probeinternational.org/2007/05/28/probe-international-opposes-world-bank-financing-congo-dams-2/

5. International Rivers Network, “Grand Inga, Grand Illusions?”, by Terri Hathaway, April 2005.
http://www.irn.org/programs/congo/050907illusions_eng.html
6. New Scientist, “Giant Congo hydroelectric project is a ‘betrayal’”, by Fred Peace.  September 30, 2002

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