China-led Consortium Wins Argentina Dam Contract

[Nan Yang]

BUENOS AIRES--Argentina's government on Wednesday awarded a contract worth billions of dollars for the construction of two hydroelectric dams to a consortium led by China Gezhouba (Group) Co. Ltd. (600068.SH).

The group, which also includes Argentine firms Electroingenieria SA and Hidrocuyo SA, will construct a $4 billion hydroelectric project capable of generating 1,740 megawatts of electricity in the sparsely populated province of Santa Cruz in southern Argentina.

The government says the dams will help curb Argentina's need to import diesel and liquefied natural gas and save some $1.1 billion a year. Argentina's rising energy deficit has become so significant that trouble paying for energy imports has led the government to implement a host of unpopular economic policies, including a ban on the purchase of foreign currencies, principally U.S. dollars. The government needs those dollars itself to pay for energy imports and to make payments on its foreign debt.

The project's critics, however, argue the river doesn't have enough water flow to generate the full 1,740MW of power. The project's isolated location will make it expensive to transport the electricity from them to other parts of Argentina, critics say.

"This project will be a huge headache for Argentina," said Gerardo Rabinovich, an energy industry consultant. "It doesn't make any sense from a technical standpoint or in terms of an investment. The country doesn't have the money to pay for this, especially when there are simpler, less expensive options available."

Mr. Rabinovich said it would make much more sense to build smaller hydroelectric projects along the borders of Brazil and Paraguay.

Argentine President Cristina Kirchner praised the project Wednesday, however, saying it would lead to greater economic development. She also said the winning consortium initially would finance the entire project.

Argentina's government first announced plans to build the dams about five years ago but repeatedly delayed the project among questions about financing. More recently, opposition politicians and critics of the government have raised questions about the transparency of the bidding process, and some have announced plans to challenge the construction contract in court.

More than 20 companies, including other firms from Brazil, China, France, Korea and Spain, had participated in bidding for the hydropower projects.

Source
China-led Consortium Wins Argentina Dam Contract