(July 4, 2012) Chile’s HidroAysén mega-dam scheme is suddenly on hold as one of the owners of the controversial dam scheme suspends its support for the risky project.

By Lisa Peryman for Probe International

A large stakeholder in the massive HidroAysén hydroelectric project, slated for Chile’s Patagonia region, and one of the planet’s most untouched and scenic areas, has brought the highly controversial project to a standstill.

Citing unclear government energy policy, the board of Colbún – co-owner of HidroAysén and the second largest power generator in Chile – has announced it is “indefinitely suspending” the environmental impact assessment of the proposed 1,500-mile-long transmission line that would cut through half the length of Chile to connect the dam project with the country’s capital, Santiago. It was a surprise move that some say signals to investors and international financial institutions to steer clear of the costly and contentious project, estimated to cost $10 billion.

“As long as there is no national policy that can count on broad consensus and provide the energy guidelines that this country needs, Colbún believes that the conditions to develop energy projects of this magnitude and complexity are not present,” Bernardo Larrain Matte, president of the board, wrote in a letter to the Chilean regulatory commission.

Chile’s president Sebastian Piñera did launch a National Energy Strategy in February but the plan was panned for its vagueness. Colbún pointed to the failure of Piñera’s government to define its priorities and tackle Chile’s highly congested transmission system, which remains the biggest problem facing the power industry in a country thirsty for supply. The suspension of the transmission line is perhaps a signal Colbún is tired of waiting.

The 2.750GW HidroAysén project involves the construction of five dams on two of Patagonia’s wildest rivers, the Baker and the Pascua. Electricity generated would travel along a high-voltage transmission line – the world’s longest, if built – through seismically active terrain, under water and around active volcanoes. Some 5,000 very visible towers, each around 70 meters high, would be required to support the line. Meanwhile, the installation of a 100-metre-wide service lane cutting underneath the transmission line could potentially fragment critical habitat for endemic species. The dams themselves would flood at least 5,000 hectares of globally rare forest ecosystems, river valleys and some of the best farmlands in the unspoilt Aysén region of southern Chile, including part of the country’s spectacular Laguna San Rafael National Park. The dams would also force many families from their lands, disrupt traditional livelihoods and affect tourism.

The five-dam project has for years been the focus of environmentalists and massive public protests, but nevertheless received the go-ahead in May 2011. Owners Colbún and Endesa Chile, the largest electric utility in Chile with a 51% stake in HidroAysén, have repeatedly said construction of the dams will not begin until approval is granted for the necessary transmission line, pending the outcome of its now suspended EIA. But directors of the HidroAysén holding company maintain that work on the hydroelectric plant can continue in spite of the delay but without the full support of Colbún, its 49% stakeholder, how they can do so remains unclear. Some speculate that the EIA suspension may represent a way for Colbún to exit the costly project entirely.

The Canadian Connection

Transelec, a consortium owned by Canadian private and public sector bodies – which includes the Canada Pension Plan Investment Board, Brookfield Asset Management, the British Columbia Investment Management Corporation and the Public Sector Pension Investment Board (PSP) – is Chile’s major transmission utility and was the prime candidate to build the 1,500 km high-voltage transmission line for HidroAysén. Indeed, Transelec completed a feasibility study and EIA for the transmission corridor, but their contract with HidroAysén was not renewed. There are no details as to why, only speculation to suggest that Transelec either wanted out or that their design plans and assessment efforts failed to impress HidroAysén’s decision-makers. Meanwhile, Canada’s official export credit agency, Export Development Canada (EDC), helped the Canadian investors to purchase Transelec. But documents, obtained by Probe International, showed how the EDC used loopholes in Canada’s Access to Information Act to keep the Canadian public in the dark about the details of its support for the investment.

For a visual sense of what’s at stake, see our Patagonia Picture Gallery.