Ecuadorean HEP dispute resolved

By Richard High02 October 2008

Brazil's Odebrecht announced this week that it will accept terms set by Ecuador's government to resolve a dispute over construction of the 230 MW San Francisco hydroelectric plant (HEP).

Ecuador expelled the company from the San Francisco HEP last week and sent troops to seize US$ 800 million worth of projects, including an airport, the Toachi-Pilatón and Baba HEPs and a rural irrigation project.

The move followed accusations by Ecuador's President, Rafael Correa, of shoddy construction of the HEP's dam, which was completed last year. Inoperable for several months due to "structural problems" it remains in-active due to "damaged machinery", according to local press reports.

An executive decree issued in August said Ecuador's actions aim to "prevent an energy crisis in the country and internal unrest that could arise from power outages."

In response Odebrecht said it had 299 staff members and specialized teams working on the problems "24 hours a day, seven days a week" with the aim of restarting normal operations by October 4.

The government has also ordered four Odebrecht executives not to leave the country. Brazil's state news agency, Agência Brasil, reported that two have already left Ecuador and two are in the Brazilian embassy, although it did not name the men.

In August the Odebrecht led construction consortium, which includes Alstom and Va Tech Hydro Brasil, refused to compensate the state for the problem, according to the decree.

In a statement released on Wednesday, Odebrecht, Brazil's largest engineering and construction company, said it had agreed to pay for repairs to the dam and to extend a guarantee on the project by one year and on the repairs by five years.

Odebrecht would also make a deposit of US$ 43.8 million until an independent international audit decided whether it owed further penalties, the statement said.

Speaking to local press on Tuesday President Correa said he would decide in the coming days what his government's next response to Odebrecht would be, but that the company was still banned from operating in the country.

"Our decision remains. Odebrecht is out of the country," President Correa said, after a meeting with his counterparts from Brazil, Bolivia and Venezuela in the Brazilian Amazonian city of Manaus.

"We are not negotiating, we are demanding justice and the country's rights to be respected," he added.

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