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DAM-L LS: Serious Financial Troubles Ahead for 3 Gorges Dam (fwd)



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subject: LS: Serious Financial Troubles Ahead for 3 Gorges Dam
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>Stratfor.com's Global Intelligence Update - 27 October 2000
>_________________________________________________
>
>Know your world.
>
>Also on Stratfor.com
>
>Troubles Ahead for China Dam Project
>China's Three Gorges dam project, set to be the largest source of
>hydroelectric power in the world, has a new energy distribution
>plan. The revisions suggest the problematic plan is now headed for
>serious financial setbacks.
>http://www.stratfor.com/asia/default.htm
>
>_________________________________________________
>
>
>Troubles Ahead for China Dam Project
>                  0045 GMT, 001027
>
>                  The management of China's Three Gorges dam project
>                  has announced a revision of its energy distribution
>                  plan that suggests the scheme is headed for serious
>                  financial setbacks.
>
>                  Three Gorges is expected to be the world's largest
>                  source of hydroelectric power if it begins operations
>                  on schedule in 2003. But it's been hampered for years
>                  by substantial budget problems, mismanagement and
>                  construction delays. The project was originally
>                  expected to cost about $11 billion, but recent
>                  estimates put the cost at more than $24 billion.
>
>                  Environmental regulators will soon require each
>                  Chinese province to supply 5.5 percent of its power
>                  from renewable resources. This is most likely a means
>                  of subsidizing hydropower stations in the country's
>                  slow-growing inland provinces, where electricity
>                  buyers are harder to find. It's also a way to
>                  redistribute coastal wealth to China's interior and
>                  help reduce economic disparities between regions of
>                  the country.
>
>                  It now seems managers of the Three Gorges project are
>                  looking for this type of support. The dam is
>                  projected to generate 18,200 megawatts of power.
>                  About 2,000 megawatts were to be used by the western
>                  city of Chongqing, near the dam itself, with another
>                  12,000 megawatts destined for provinces in central
>                  China.
>
>                  According to the project's deputy director,
>                  authorities in Chongqing have refused their entire
>                  allocation of power from the dam, citing an existing
>                  surplus of generating capacity. Instead, those 2,000
>                  megawatts--and another 1,000 megawatts turned down by
>                  two central provinces--will be diverted to
>                  energy-hungry Guangdong Province, one of China's
>                  wealthiest regions.
>
>                  There's no doubt Guangdong needs more power. The
>                  province is China's export powerhouse, and growth in
>                  export demand accounts for part of the phenomenal
>                  18.6 percent rise in electricity consumption in the
>                  first six months of 2000. Parts of Guangdong suffered
>                  shortages in June, when a heat wave raised
>                  air-conditioning demand.
>
>                  Much of western China, on the other hand, is
>                  struggling economically. Officials in Chongqing -
>                  once part of Sichuan province, but recently given
>                  "independent municipality" status - have already
>                  reneged on a pledge to buy large amounts of power
>                  from the nearby Ertan dam. This suggests Chongqing's
>                  state-owned industries are still floundering, and
>                  that electricity demand has grown more slowly than
>                  expected.
>
>                  Beijing's leaders must be fuming at the situation's
>                  irony. Chongqing's political profile was raised as a
>                  sweetener for local officials, who opposed the Three
>                  Gorges dam on the grounds it would interfere with the
>                  city's port traffic. Now that the project is having
>                  trouble finding buyers for its electricity, the
>                  promotion has given Chongqing the leverage to walk
>                  away from an unfavorable marketing arrangement.
>
>                  Chongqing's successful showdown with the center may
>                  reflect the newfound clout of western officials, but
>                  the cost to China may be very high. Sending Three
>                  Gorges power to Guangdong is probably not a sound
>                  alternative to selling it locally. Transmission
>                  losses are bound to be enormous: the distance between
>                  Guangzhou and the main dam site, near Yichang in
>                  Hubei province, is some 650 miles.
>
>                  By contrast, Hong Kong lies just across the border
>                  from Guangdong and already enjoys a surplus of power,
>                  thanks to archaic utility regulations that prohibit
>                  competition between the city's two power companies,
>                  Hongkong Electric and CLP Holdings.
>
>                  Regulators require them to maintain separate "reserve
>                  margins" of generating capacity to meet unexpected
>                  demand peaks. Guangdong is already buying some of
>                  Hong Kong's spare power, and a fully liberalized
>                  electricity market would encourage it to buy even
>                  more.
>
>                  But using the Three Gorges as a power source instead
>                  will mean more revenue for the dam's developers - and
>                  that could be crucial to making the dam project
>                  acceptable to local residents.
>
>                  Efforts to relocate farmers from the area are moving
>                  very slowly, and there are reports that much of the
>                  money set aside for compensation payments has been
>                  skimmed off by corrupt officials. Hidden subsidies to
>                  the hydropower sector, like last week's "green
>                  energy" policy, perhaps should be seen not as
>                  environmental initiatives but as an attempt by the
>                  central government to prevent public anger from
>                  boiling over.
>

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