June 21, 2009
Probe International is calling on the Canada Pension Plan (CPP) Investment Board to halt its investment in a controversial hydro transmission project in Chile’s Patagonia region. The CPP is currently listed as an investor in a 1,500-mile (2,400 kilometres) transmission project designed to handle power from five proposed hydroelectric dams in the Chilean Patagonia.
The transmission corridor will be built by Transelec, Chile’s national transmission provider, which is owned by CPPIB, Brookfield Asset Management, the British Columbia Investment Management Corporation and the Public Sector Pension Investment Board (PSP). The 1,500-mile transmission corridor will cross through 14 legally-protected natural areas spanning more than half of the length of Chile.
The hydroelectric dams, which will be supplying the power, are expected to cost as much as $3-billion (all figures US) while the transmission project is estimated to cost $2-billion. The dams will be built by HidroAysén, a consortium made up of Endesa-Chile and the Chilean company Colbun. The dams—two in the Baker River and three in the Pascua River—will produce 2,750 MW of power and flood 5,000 hectares of land.
A diverse coalition of 58 organizations from Chile, USA, Canada, Spain and Italy are working to halt the project, and according to a recent survey from IPSOS, more than 57% of Chileans disapprove of the mega hydroelectric project in Patagonia. 20,000 people have also joined the “Patagonia Without Dams” campaign through its website.
According to Patricia Adams, Executive Director at Probe International, “many believe it (the transmission project) would do even more harm to Chile’s environment than the dams themselves: it would be the world’s longest with 5,000 high voltage towers and lines running through seismically active zones, over fjords, and through volcanic areas.”
HidroAysén has already submitted its Environmental Impact Assessment (EIA) to environmental authorities in the country. But in its EIA, the company excluded the transmission component of the project. Under Chilean regulations, once approval for the dams is secured, approval of the transmission project becomes a fait accompli because it would be deemed an essential element of the project by regulatory authorities.
Critics, including Probe International, call this separation of the transmission and generation components of the project an “administrative farce” and one that will produce a flawed cost-benefit assessment.
CPPIB has tried to distance itself from responsibility from the controversial dam project. But PI says that without CPPIB’s investment, the project wouldn’t be completed.
“Transelec is both an essential party to the development of the five dams planned for Patagonia and a proponent of the transmission lines needed to accommodate the dams’ output,” Adams says in a recent letter to David Denison, CPPIB’s President and CEO.
CPPIB claims it is committed to being a good corporate citizen and providing information on this and other transmission schemes but, as Probe International points out, its company, Transelec, has quietly used agents to assemble 1,600 exploratory mining concessions that appear to correspond to the eventual route of the transmission corridor. The General manager of HidroAysen, the company that wants to build the dams, defended the “mining shield” as a “standard” way of securing an area a company plans to occupy. Transelec, meanwhile, has yet to inform Chileans of its plans.
Chileans are outraged by this tactic, says Probe’s Patricia Adams. Chilean environmental lawyers are calling it an “abuse of the law” and point out that mining concessions devalue the land they claim and will lower the compensation that must be paid to the landowners in the path of the transmission line.
Worse still, Adams warns CPPIB, the dams and their transmission corridor would be vulnerable to serious operational interruptions, deliver costly power, and be viable only if Transelec can maintain its monopoly and pass the costs and risks of the investment on to Chilean ratepayers.
“We believe that this will strike Canadians as a poor investment on which to stake their pensions,” says Patricia Adams. “The scheme is viable only by exercising monopoly control.”
Juan Pablo Orrego, coordinator of the Patagonia Defense Council, concurs and has warned CPPIB that the project, which depends on the monopoly powers in the electricity sector, would make “the regulation of the energy sector very difficult for the State, creating serious problems in terms of free competition, distorting the market and price fixation in the sector.”
Furthermore, Orrego says a recent study showed that the electricity from the dams is unnecessary to meet the country’s future energy needs. He says energy efficiency, renewable sources of energy and planned projects are more than enough to meet the country’s future demand for electricity.
In response to the environmental damage and economic risks associated with the dam construction, Probe International’s Patricia Adams is urging CPPIB to abandon the project. The Patagonia Defense Council has also called on CPPIB to renounce the dams project as “anachronistic, outdated, harmful and unnecessary.”
For further reading, see: