Brazil Finally Admits Belo Monte Will Cost Well Over US$ 11 Billion

Belo Monte dam in Xingu river, BrazilBrazilian Belo Monte hydroelectric power plant’s actual construction will begin in September or October. The president of the winning consortium, Norte Energia, José Ailton de Lima, says the final price of the project will be somewhere between 19 billion reais (US$ 10.85 billion) and 30 billion reais (US$ 17.13 billion).

The lower amount is the estimate made by the government (based on studies by the Energy Research Company (“Empresa de Pesquisa Energética” – EPE) while the higher price is what private construction contractors think it will cost.

That is the first time someone actually involved in the project on the government side has admitted that the lowball 19 billion reais price tag is unreal.

Even so, Lima went on to tell, “I am absolutely convinced that this will be a profitable enterprise. One of the reasons is that the lead partner in our consortium is a government holding company (the state-run electricity company CHESF) and there is the possibility of more state-run firms joining the project later and they operate with a minimum return on investment.” To insiders this is called “the patriotic return on investment.”

Lima explained that for the actual construction to get underway the consortium still needs another license from the Environmental Protection Institute (Ibama). The second license is an “installation license.”

Belo Monte received an “environmental license” in February with 40 socio-environmental tasks that are supposed to be completed before construction – even the government has allowed that the cost of this will be more than 3 billion reais (US$ 1.71 billion).

Among the tasks is the creation of three conservation units, salvation of animals and fish in the area that will be flooded, ensure that the river remains navigable, construction and repair of schools and hospitals in the region, along with implanting basic sanitation systems and protection of beach areas on riverbanks where turtles breed and reproduce.

Lima played down media reports of changes in the composition of the consortium and discontent among the partners, calling them mostly unfounded. The possibility of changes in shareholder participation is a part of the contract, he explained.
As for government participation in the construction of Belo Monte, Lima pointed out that it was less than 50% (CHESF has 49.98%), and added that it was possible for government participation to increase, although he considered that possibility remote:

“This is a profitable investment. The private sector will understand that and I believe they will want in. However, as Brazilian president Luiz Inácio Lula da Silva has said himself, if private investors do not appear it may be that the government’s participation will rise.”

ABr

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