(Environmental Finance, London) — JPMorgan Chase has come under pressure to refuse to provide a loan for the controversial Gilgel Gibe III hydropower dam in Ethiopia.
Three NGOs – Campagna per la Riforma della Banca Mondiale in Italy, Les Amis de la Terre in France and International Rivers in the US – have written to the US bank to urge it to refuse a $400 million commercial loan request from the Ethiopian government in connection with the project, which they say would violate the bank’s environmental policy.
The 1,870MW dam is already under construction by Italian firm Salini, at an estimated cost of €1.4 billion ($2.1 billion), and would be the third stage in a project to dam the Gilgel Gibe River for hydropower. The Italian export credit agency SACE has refused to guarantee the project.
In November last year, the NGOs carried out a fact-finding mission to investigate the proposals, which they say uncovered evidence of environmental, social and legal issues with the dam. Problems raised by the NGOs include:
* Environmental Impact Assessment (EIA): The NGOs state that the EIA – released by SACE – “is wholly inadequate according to international best practice”. In particular, they criticise the EIA for failing to assess the downstream impacts of the dam on the Omo River which will be diverted as part of the project. Although the dam is 13% complete, the project has yet to receive a permit from the country’s environmental protection authority, as required under Ethiopian law, the NGOs say.
* Emissions: The dam will create a 150 kilometer-long reservoir upstream, submerging 500 hectares of agricultural land, 1,500 hectares of riverine forest and 25,000 hectares of deciduous woodland, according to the NGOs. The EIA states that 20.4 million cubic meters of biomass would be left to decompose underwater, which the NGOs say would cause “a significant amount of greenhouse gas [GHG] emissions” from the reservoir. They say no analysis of the GHG emissions from the reservoir has been carried out, which would be in violation of JPMorgan’s requirements under its environmental policy.
* Communities: The EIA reports that 400 households will be displaced, and social and commercial exchange between communities on different sides of the river interrupted. The NGOs allege inadequate consultation, in particular with 275 nomadic households which they say have not been considered for consultation or compensation.
* Questions over the procurement process: Under Ethiopian law and international guidelines, an international tender should have been issued by for the construction of the dam. Instead, the Ethiopian Electric Power Corporation (EEPCo) signed a contract with Salini after direct negotiations.
* Energy exports: The NGOs say that Ethiopia’s infrastructure will not be able to absorb the extra electricity from the dam, suggesting that most will be exported, which they call “a questionable priority” for the country given its development situation.
JPMorgan Chase declined to comment.
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EDITOR’S NOTE
The hundreds of millions of dollars Woyanne is squandering in the Somalia war could have been used to pay for the dam, not to mention schools, health care, clean water supply, etc.
10 thoughts on “JPMorgan urged to reject loan for Ethiopian dam”
This is ridiculously too much $$$$$ they are talking about for a project that is not going to benefit the locals. Instead they (the locals) will be negatively affected it.
– forced displacement
– social and economic isolation due to the dam
– health problems due to toxic waste and green house emmissions
On top of all this, it is not sure if the country as a whole will benefit from it as at all. What if the neighbouring countries refuse (find it too expensive) to import electricity from Ethiopia? What if the rebels (present or future) cut off the lines after all this amount of money and labour is wasted?
All political issues aside, I don’t think these projects are practical given the current development situation of Ethiopia.
Dear Editor, I think you´re wrong. The weyanne regime is bankrupt and on the verge of collapse and there is no way it can afford the cost of an expensive war like that in Somalia. The Somalia project is being financed by the USA.
Electric POWER to the people!
WHERE DID GET THE INFORMATION THAT THE DAM IS 13% COMPLETED????????????
The editor comment is wrong, because the basic problem is to have environmental clearance to get the required money.This is as a result of woyanes political decision,ignoring the proper procedure(man alebigninet),environmental clearance before starting even the design.
Some issues are beyond politics. This is one of them. Ethiopia needs to do a lot with respect to development, economic growth. It would be foolish for Ethiopia, a country languishing in abject poverty to tie up its hands or to be tied by any stringent environmental considerations.
Hydroelectric power is a clean source of energy. Due to its expansive highlands and rugged terrain, Ethiopia has a huge potential and comparative advantage to generate hydro power, for domestic as well as export market. Energy is the crucial input for advancing development, be it industrial or agricultural. That is why Ethiopia should not be constrained by any environmental considerations as these foreign NGOs are trying to do.
It will be a huge mistake for an Ethiopian who truly wants to see long term development in the country to be acomplice with these so called NGOs and to call upon the creditor bank reject the loan. When it comes to water resource development projects, there are so many forces out there (some of them agents of our cometetive neighbours) who raise all sorts of phoney claims and are determined to work against Ethiopia.
One should stand by the side of Ethiopia when the question is building fundamental infrastructure such as this one which outlives any current or subsequent government.
One should not be enemy of its own country- as the saying goes “baluan godahu bla….benchet wegach” endayhon!!!
Considering the looming disaster in the banking sector in the US, this is not a good time for the shareholders of JP Morgan to worry about environmental consideration. Ethiopia will and must use its resources to the fullest and I agree with GAGI’s comment above that somethings are above party and politics. If JP changes their mind there are many who can readily provide the financing. JP itself may be getting the money from China, sigapore or UAE anyways as was the case with Citi and Merrill Lynch. Why not get the money from the source. Elias, although I am disgusted by your positions, you seem to be the only one that brings the issues to the forefront for us to discuss and I commend you for that. Please keep you rethoric a little civilised and we will be ok.
LA The prject started during Mengestu
Lack of adequate planning and less consideration to the environment and the lives of many hard working people will lead to poor judgment and finally to a total destruction.
Building a dam to divert the Gilgel Gibe River for hydropower requires a careful planning and a lot of advice from dam building experts before one begins to build a dam. Meles Zenawi may not know what it takes to build a dam like the one at the Gilgel Gibe River. Dam building, like any other dams such as the Aswan High Dam in Egypt, and the Three Gorges Dam in China, takes a lot of money, time and energy, but at this time Ethiopia does not have enough money to build such a huge project because most of the Ethiopian tax payers money has been allocated to finance Woyanne’s war with Somalia and with its own people in the Ogaden region.
Before ordering the workers to build a dam, Meles should have first learned the difficult tasks of building a dam: relocating the local people and compensating them for the damages done to their homes and lands. Then, he should have known the negative effects of building a dam: the destruction of the ecosystem, affecting the surrounding environment and destroying the inhabitants of that area. One cannot replace the natural beauty of a land with artificial beauty; the natural river with artificial river; the natural lake with man-made lake. So lack of good planning has put Meles into disarray and frustration, and the “project he has started may never be finished because the US bank may not allow him to borrow millions of dollars for the new project. Also, after the energy experts have examined how much extra electricity the new dam will provide, they say that the idea to export the extra energy to another country is ‘a questionable priority’ for a developing country like Ethiopia. Meles could have avoided all the problems he is facing about completing the new dam has he sat down with the experts and thought about the consequences of building a new dam without the knowledge of the experts such as the environmentalists, the bankers, and without the permissions of the local people for the sake of fairness. Of course, in the kingdom of Meles, there is no fairness, consultation, discussion, and, above all, justice.
Do you guys ever heard of small dam? That only cost 1000 dollars instead of 400million dollars? Go to google and type small dam and come back to me.
For 400 million dollars we could have built 400,000 small dam without affecting any surrounding environment and relocating people… Think about it we also would not have took the loan to do it… By the way 400,000 dam would have giving us the same out put like one big dam if not more and the poor people benfited because of cheap price