BANKS DODGY DEALS CAMPAIGNS
About BankTrack
20 years of BankTrack – Our history
Visit us
Organisation
Our team
Our board
Guiding principles
Team up with us
Jobs at BankTrack
Our annual reports
Funding and finances
BankTrack in the media
Our privacy policy
Donate
2023-09-18 00:00:00
New report and blog: Barclays' bond with Adani
2023-08-23 00:00:00
Decarbonization: steel not making the cut
2023-07-27 00:00:00
Two months ago 62 organizations and 3 Goldman Environmental Prize winners wrote an Open Letter to the TNFD: No one responded
2023-07-13 00:00:00
The Sustainable Steel Principles: One step forward when leaps are needed
2023-09-15 17:34:10
The number of major banks refusing to support EACOP reaches 24
2023-07-31 14:30:01
Equator Principles recognise projects’ risk to climate for the first time
2023-05-17 14:30:30
EACOP Financial Advisor SMBC is no longer involved with the project
2023-03-28 13:43:00
French bank Société Générale withdraws from Rio Grande LNG
Connect
2023-09-18 00:00:00
Barclays' bond with Adani
2023-06-26 00:00:00
How should financiers align with the Global Biodiversity Framework? Five Key Principles
2023-04-13 00:00:00
Banking on Climate Chaos 2023
2023-04-12 00:00:00
The East African Crude Oil Pipeline (EACOP): Finance Risk Update No. 4
See all publications
Sections
Banks Dodgy Deals Campaigns
Our campaigns
Banks and Climate
Banks and Human Rights
Banks and Nature
Banks and Pandemics
Our projects
Tracking the NZBA
End Coal Finance
Banks and Putin's war in Ukraine
Banks and steel
Tracking the Equator Principles
Tracking the PRBs
Find a Better Bank
Banks and the OECD Guidelines
Media
News Publications
Fossil Banks No Thanks StopEACOP Forests & Finance Banks & Biodiversity Drop JBS Bank of Coal Don't Buy into Occupation
BankTrack
About BankTrack 20 years of BankTrack – Our history Visit us Organisation Our team Our board Guiding principles Team up with us Jobs at BankTrack Our annual reports Funding and finances BankTrack in the media Our privacy policy Donate
Successes Contact BankTrack
Donate Mailing list Facebook Twitter Login
Home › Partner news ›
Partner News

Lack of private sector participation in Belo Monte Dam consortium signals investor concerns over financial risks

Amazon mega-dam deemed unfeasible in risk scenario analysis
2010-07-16 | Brasilia, Brazil
By: International Rivers & AmazonWatch
Contact:

Brent Millikan, International Rivers, +55 61 8153-7009, brent@internationalrivers.org
Christian Poirier, Amazon Watch, + 1 510 666-7565, christian@amazonwatch.org

2010-07-16 | Brasilia, Brazil
By: International Rivers & AmazonWatch
Contact:

Brent Millikan, International Rivers, +55 61 8153-7009, brent@internationalrivers.org
Christian Poirier, Amazon Watch, + 1 510 666-7565, christian@amazonwatch.org

This week's announcement detailing the members of the consortium seeking to build the controversial Belo Monte Dam in the Brazilian Amazon reveals a striking lack of private sector participation. The 18-member Norte Energia consortium(1) is marked by the absence of key players in the country's dam-building industry. State-owned or state-controlled participation in the consortium totals 77.5 percent, dwarfing the role of private sector investors and reflecting concerns about the financial risks associated with the world's third-largest planned hydroelectric project.

The lack of private sector enthusiasm reflects a series of unanswered questions, including the dam's higher-than-projected construction costs and uncertain generating capacity, as well as doubts about costs stemming from mitigation of its massive social and environmental impacts.  

The federal government's willingness to use massive public subsidies and pension funds in a project of dubious economic viability has drawn sharp criticism in Brazil.  "Taxpayers and workers with investments in pension funds have no idea of the huge risks associated with Belo Monte.  The workers of Petrobras, Caixa Economica Federal, and Banco do Brasil are spending their retirement money to subsidize what private investors are afraid to touch," said Raul do Vale, spokesperson from  the Instituto Socioambiental.

An influential report entitled "Uncertainties in Amazon Hydropower Development: Risk Scenarios and Environmental Issues around the Belo Monte Dam" released in May by the Instituto Tecnológico de Aeronáutica in São Paulo and the Conservation Strategy Fund in California has fueled investor fears. The report found that there is only a 28 percent chance that the Belo Monte Dam would yield a positive rate of return over the first 50 years of its operation. The report's risk scenario analysis calculates a high likelihood of a loss for investors ranging between US$3 - 8 billion.

Questions over the inefficiency of Belo Monte, which will produce an average of only 39 percent of its 11,233 megawatt installed capacity due to seasonal fluctuations in the river's flow, indicate that the project's heavy financial risks could only be solved by building additional reservoirs upstream.  The risk scenario report concludes that "construction of Belo Monte now will lead to an entirely foreseeable - some would say planned - crisis, which will exert enormous pressure for the construction of new dams upstream of Belo Monte to store water and enable the dams' capacity to be fully used."  Critics have long maintained that Belo Monte is only the first of a series of planned dams on the Xingu.

 Given uncertainties over the project's economic viability, the Brazilian government has announced a series of generous perks to lure investors, including subsidized loans, tax breaks and public-guaranteed insurance.  The National Development Bank, BNDES, has committed to finance up to 80 percent of Belo Monte's US$17 billion price tag, with interest rates of a mere 4 percent, a generous grace period and 30 years for repayment in what will be the largest loan in the bank's history.  The bank has already issued subsidized credit totaling  US$8 billion (R$14 billion) and 50 percent tax breaks over 10 years to increase the private sector's involvement in Belo Monte's auction on April 20th and to entice European turbine suppliers Alstom, Andritz, and Voith-Siemens in signing with the consortium.  BNDES has repeatedly been charged with having weak social and environmental safeguards, a lack of transparency in lending decisions, and deficient public oversight mechanisms.

"Belo Monte and other mega-dams in the Amazon are not necessary.  Studies have shown that by investing in energy efficiency and alternative sources of energy, Brazil could avoid the need for huge dams in the Amazon and save billions in the process," said Brent Millikan, Amazon Program Director at International Rivers. "This project is a government handout to large construction and energy companies, several of which are major funders of political campaigns, at the expense of the Brazilian taxpayer, indigenous people, riverbank dwellers, small farmers and the Xingu River's incredible biodiversity."

-----------------------------------------------------------------------------------------------
Note

(1) Norte Energia is dominated by the state-led electric utility Eletrobras, with a 49.98% stake divided among itself (15%) and regional subsidiaries Eletronorte (19.98%) and Chesf (15%).  Pension funds of government banks and other state-owned entities will hold an impressive 25% stake in the consortium, including the Petros fund of Petrobras employees (10%), the funds Funcef (2.5%) and Caixa FI Cevix (2.5%) pertaining to Caixa Econômica Federal employees, and finance from Bolzano Participações (10%), which draws on the Previ fund of Banco do Brasil employees, as well as investments from Spanish electric utility Iberdrola.   Such government-led participation, totaling 77.5%, dwarfs the role of private sector investors in the consortium, such as regional pig iron producer Sinobras (1%) and energy company Gaia Energia e Participações of Grupo Bertin (9%), the leading player in the Brazilian Amazon's beef industry.

Dodgy Deals
There are no active project profiles for this item now.

Belo Monte dam

Brazil
Project
On record
Hydroelectric Power Generation

Belo Monte dam

Brazil
Sections
Banks Policies Dodgy Deals Campaigns
Our campaigns
Banks and Climate Banks and Human Rights Banks and Nature Banks and Pandemics
Our projects
Tracking the NZBA End Coal Finance Banks and Putin's war in Ukraine Banks and steel Tracking the Equator Principles Tracking the PRBs Find a Better Bank Banks and the OECD Guidelines
Media
News Publications
Fossil Banks No Thanks StopEACOP Forests & Finance Banks & Biodiversity Drop JBS Bank of Coal Don't Buy into Occupation
BankTrack
About BankTrack 20 years of BankTrack – Our history Visit us Organisation Our team Our board Guiding principles Team up with us Jobs at BankTrack Our annual reports Funding and finances BankTrack in the media Our privacy policy Donate
Successes Contact BankTrack
Vismarkt 15
6511 VJ Nijmegen
The Netherlands
Contact@banktrack.org
Donate Mailing list Facebook Twitter
©2023 BankTrack
BankTrack is a registered charity in the Netherlands (ANBI) - RSIN 813874658
Find our privacy policy here

Stay up to date

Sign up now for all BankTrack's news


Make a comment

Your comment will be reviewed, before being posted