SNC-Lavalin may have to abandon involvement in DRC dam project

(September 24, 2013) SNC-Lavalin may have to pull out from a consortium bidding on a contract to construct a massive dam project in the Democratic Republic of Congo.

By Brady Yauch for Probe International

SNC-Lavalin’s debarment from World Bank projects because of its corrupt ways may force the company to withdraw from bidding on a contract to construct a massive dam in the Democratic Republic of Congo (DRC).

At stake is a contract to build the Inga III Dam in the African country, which is expected to cost anywhere from $12 billion to $20 billion  and produce 4,800 MW of electricity. The World Bank has already committed $50 million to the project to complete environmental impact assessments (EIAs) and technical studies. In May, the DRC government announced that construction on the dam will begin by October 2015.

Financing for the project is expected to come from public sources: the Africa Development Bank, the World Bank, the French Development Agency, the European Investment Bank and the Development Bank of Southern Africa have all been named as potential contributors.

The DRC government has reportedly opened a bidding process to select a lead contractor for the Inga III Dam, with SNC-Lavalin part of a consortium that includes two South Korean firms, Daewoo and Posco. But because SNC-Lavalin and more than 100 of  its affiliates are barred from bidding on World Bank-sponsored projects, the engineering giant’s involvement with the Inga III project could well be in jeopardy.  Even more so as the African Development Bank, which has a “cross-debarment agreement” with the World Bank, has also debarred SNC-Lavalin. The African Development Bank has already thrown its support behind the project.

When asked for a comment, SNC-Lavalin explained: “An internal policy of SNC-Lavalin stipulates that we cannot comment on the projects for which SNC-Lavalin is a tender. Consequently, we are sorry for not being able to answer your questions.”

Inga III is just the first phase of a massive dam project. According to International Rivers, Grand Inga, as the project is called, would be constructed in six development phases with Inga III being the first. Inga III will be constructed in two steps, initially a low head and then a high head, extending the dam wall and making it higher. If completed, Grand Inga is projected to cost a gargantuan $80 billion. And it’s expected to produce as much as 40,000 MW of electricity – about twice the size of China’s Three Gorges Dam, currently the largest hydroelectric project in the world. Supporters of the project say that would meet as much as 40% of all of Africa’s electricity needs.

“A myth dreamed of for 40 years, Grand Inga is becoming a reality with an action plan spread over several plants which will be added in stages,” is how the DRC government  described the project after a recent meeting in Paris with the World Bank and other financial institutions.

But projects of this size – and Three Gorges is a perfect example – often produce problems of similar magnitude. Corruption and bribery are often rampant throughout the construction of such mega projects. The DRC is ranked one of the world’s most corrupt — 160 out of 174 on Transparency International’s Corruption Index.

Past dams in the DRC have been costly and failed to meet forecasts for electricity production. Inga I and Inga II, completed in 1972 and 1982, respectively, have only operated at about 30% of their capacity.

According to Engineering News Record, analysts are dubious about Inga III proceeding at all because of a lack of government commitment in the past and insecurity caused by a civil conflict between the country’s president and rebel groups. South Africa analyst Andrew Kenny said that investors would fear political and commercial risk “from an unstable government in a country wracked with bloody conflict.”

Meanwhile, says Engineering News Record, delays in the World Bank-funded rehabilitation of Inga I and Inga II and a failure to compensate millions of people who were displaced during construction of those two dams decades ago indicate how risky investing in Inga III could be. The delayed World Bank Inga I and Inga II rehabilitation projects, initially slated for 2003 at a cost of US$200 million – involving turbine replacement and refurbishment, construction of a second transmission line to Kinshasa and rehabilitation of the Inga-Kolwezi grid – are now estimated to cost US$883 million.

Yet being forced out of the consortium that wants to bid on Inga III – which would be another blow to SNC-Lavalin’s reputation as it reels from ongoing corruption charges and trials – might actually be a blessing in disguise if the project turns out to be the investment and security debacle that all indicators suggest it is.

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