Battle of the Titans

Amid continued calls by dam builders to accelerate environmental licensing in Brazil, a battle looms between industry giants which could delay the damming of the Madeira River.

Last December, the Madeira Energia S/A consortium (MESA), led by engineering firm Odebrecht and state utility Furnas won the right to build Santo Antonio Dam by offering to sell most of the energy generated at a surprisingly low price, about $50/MWh at today´s exchange rates. Speculation was that MESA counted on selling a portion of the energy on the open market, where the cost of energy is expected to rise. Another crucial factor would be MESA´s ability to also win the auction for Jirau Dam, the second projected for the Madeira, providing the consortium with advantages of economy of scale to lower construction costs, essentially transferring its operations a few miles upstream after completing work on Santo Antonio.

But in May, 2008, MESA was bushwhacked by the Enersus consortium, led by French water and energy conglomerate Suez and construction giant Camargo Corrêa, which offered to sell energy from Jirau to the grid for less than $45/MWh. Even more surprising was Enersus´s announcement that they planned to move the Jirau dam site 12.5 km downstream to a site called the Ilha do Padre.

Odebrecht immediately cried foul, and threatened to take legal action to nullify the Jirau auction, on the grounds that the companies were bidding on a pre-determined site for the dam.

Yesterday, Brazil´s National Electrical Energy regulatory agency, ANEEL, ruled in Suez´s favor, confirming the auction´s results. Odebrecht says it is considering challenging the auction results in court. Camargo Corrêa, for its part, says Odebrecht changed the original design plan for Santo Antonio Dam as well, and threatens a counter-suit if Odebrecht sues.In any case, Suez will have to submit its new design plan to ANEEL and environmental licensing authority IBAMA for approval.

Brazil´s Energy Minister, Edison Lobão, said he expects the two consortia to come to an understanding. But, with the economic return of both dams seen as extremely sensitive to construction delays, especially given the constraints of the long Amazon rainy season, the titans of the Brazilian dam-building industry could end up accomplishing what environmental activists have so far not been able to do - make the Madeira dams inviable.