The High Cost of Poor Management

In Costa Rica, the state power company will have to pay $112 million to the contractor of the Chucás hydroelectric project, for "additional expenses that it authorized and then refused to recognize."

Wednesday, November 29, 2017

In the ruling issued by the International Center for Conciliation and Arbitration (CICA), to which the company Enel Green Power Costa Rica appealed to resolve a conflict that originated in 2015 due to an almost $148 million increase in the Chucás hydroelectric project, which has not yet been completed, it was established that Instituto Costarricense de Electricidad (ICE) acted with "bad contractual faith".

In March 2011 Enel Green Power obtained a contract to develop, under the concept of BOT (Build, Operate and Transfer), a hydroelectric plant called Chucás, in Concepción de Atenas, Alajuela.

See: "Enel Green Power Starts Lawsuit in Costa Rica Over Delay in Works"

An article by notes that "...The ruling frees (Enel Green Power Costa Rica) of responsibility for the cost overruns by clarifying that the ICE was fully involved in the construction of the work because it participated "actively" in the audit, even having permanent staff at the project site. In addition, the document indicates, it took a leading role in making decisions on modifications requested by the contractor."   

"... The arbitrators confirmed that the problems in the work were due to chance circumstances such as floods, landslides and slope instability. These unforeseen events forced the project to be suspended for almost three months, as well as varying the location of part of the facilities and stabilizing slopes.  This raised costs." 

"It was evident and logical, because of the entity's knowledge of the matter, that changes caused largely by geological aspects, represented a considerable increase in costs related to the construction of the project," the resolution reads. However, the ICE, with full knowledge of the cost overruns, agreed to the continuation of the works under the reasoning that a solution would be sought later on and then refused to recognize the increase in the cost of the work."

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More on this topic

Lawsuit Over Hydroelectric is Rejected

July 2017

In Costa Rica a lawsuit filed against the ICE by Unión Fenosa Generadora La Joya, has been rejected. The case included a $7.9 million claim for alleged overcharges for the suspension of a hydroelectric project in Turrialba. reports that "...The case dates back to 2002 and relates to a BOT  - build, operate and transfer - contract signed between the ICE and the Spanish private generator to produce 50 Megawatts (MW) of energy with a water source in the canton of Turrialba."

Enel Green Power Starts Lawsuit in Costa Rica Over Delay in Works

July 2015

The Italian company in charge of the 50 MW hydroelectric station Chucás has appealed the fine of $4.6 million imposed due to delays in the construction of the plant.

The hydroelectric project, which is being built in the format of Build, Operate and Transfer (BOT) in Atenas in Alajuela, has been delayed due to "external causes such as landslides caused by geological problems and flooding", explained the company to .

CEL’s Problems with Contractors

May 2012

The Executive Hydroelectric Commission of the Lempa River in El Salvador is generating recurring conflicts with international companies who they have contracted.

"The administration of the Executive Hydroelectric Commission of the Lempa River (CEL) is still creating expenses for Salvadorans both because of a lack of investment as well as the international arbitrations it has caused, for which it had to pay millions in compensation, and what is more, it is likely to continue to incur expenses in the 'conflict resolution'," according to an article

Hydroelectric Construction Contract Uses “BOT”

August 2011

"Build-Operate-Transfer" is the format under which the company P.H. Chucás will manage the hydropower project for the Instituto Costarricense de Electricidad (ICE).

The contract countersigned by the Controller General of the Republic (CGR) states that the ICE will buy "hydroelectric energy in blocks of up to 50 MW (megawatts)" for a period of 20 years, therefore paying a total $495 million to P.H. Chucás .

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AES Changuinola

In late 2005, AES began developing the Changuinola hydro power project and currently the project is in the phase of building the roadways to access that facility. The formal cornerstone laying ceremony took place on October 25, 2007. The project's total completion represents an investment of approximately $563 million and the estimated date for the Changuinola hydro power plant to go into commercial operation is the first quarter of 2011. Through this new facility, AES contributes to the country's development and helps face the growing demand of energy in Panama, which requires an additional 50 MW each year. The construction of the new Changuinola I Hydro Power Plant: * is an asset to Panama * will generate clean and 100% Panamanian energy * will create opportunities for previously excluded populations * will contribute to solve the country's energy situation * will help Panama to continue growing The construction and operation of the hydro power plant will be under the responsibility of AES, a multinational energy corporation with world-class standards and an active presence in Panama.
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