Ecuador to seek US$210 million in damages for 230-MW San Francisco

The government of Ecuador announced it will file civil and criminal actions seeking US$210 million in damages from Brazilian constructor Odebrecht for alleged defective construction of the 230-MW San Francisco hydroelectric project.

Board Chairman Jorge Glas of Ecuador’s Solidarity Fund presented results April 7 of a technical audit of San Francisco by Italian consultant Electroconsult. Glas said the audit provided causes of defects in construction of the hydro project on the Pastaza River in Ecuador’s central Andean highlands.

Last year, Ecuador President Rafael Correa accused Odebrecht of having built the project poorly. San Francisco was completed in 2007, but was not functioning because of damaged machinery. Correa expelled the firm from Ecuador and sent troops to seize US$800 million worth of projects being carried out by Odebrecht, including an airport, two hydroelectric plants, and a rural irrigation project. (HNN 1/14/09)

In addition to a civil complaint, the government said project developer Hidropastaza would present a criminal complaint against Odebrecht alleging embezzlement. The government alleged fluctuations in the exchange rate between the U.S. dollar and the Brazilian real increased the project cost by US$30.5 million.

It also accused Odebrecht of redesigning the project, increasing risk to the structure and operation, in order to win an early completion bonus of US$13.6 million.

Ecuador also filed an international arbitration demand in November, seeking to suspend payments on a project loan by Brazilian national development bank Banco Nacional de Desenvolvimento Economico e Social, alleging the terms were unlawful.

Odebrecht had agreed to pay for repairs to San Francisco and to extend a guarantee on the project by one year and on the repairs by five years. The contractor had also said it would make a deposit of US$43.8 million until an independent international audit decided whether it owed further penalties.


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