Ecuador’s government has reached an agreement with Power China to initiate the process of ending arbitration related to the Coca Codo Sinclair hydroelectric plant, the country’s largest. Energy Minister Inés Manzano confirmed that both parties have agreed to abandon the arbitration process, though three procedural steps remain before it is officially concluded.
The arbitration was initiated by Ecuador‘s power company CELEC in 2021 through the International Chamber of Commerce due to cracks in the 1,500-megawatt plant’s machinery, which have hindered its full operational capacity. The plant, constructed by Sinohydro Corp, a subsidiary of state-owned Power China, began operations in 2016 and supplies approximately 30% of Ecuador’s electricity. Despite its importance, the plant has experienced ongoing technical challenges since its inception.
In a related development, Ecuador signed a “Settlement Agreement” with Sinohydro, a subsidiary of Power China, to “leave” the arbitration over defects in the Coca Codo Sinclair hydroelectric plant. Minister Manzano emphasized that this is just the beginning of the process, with three legal documents required before the arbitration can be officially concluded. The agreement follows discussions between Ecuadorian officials and Power China, including a meeting between President Daniel Noboa and Chinese President Xi Jinping, where the possibility of transferring the operation and maintenance of Coca Codo Sinclair to a Chinese company was discussed.
The arbitration process began in May 2023 when CELEC filed a claim against Sinohydro in the International Court of Arbitration of the International Chamber of Commerce, seeking compensation for construction defects in the plant. Sinohydro also presented claims against Ecuador, leading to a complex legal dispute. The plant, inaugurated in 2016, has faced technical issues since its inception, including cracks in its machinery and problems with its sediment removal system, which have hindered its full operational capacity.
The resolution of this arbitration is significant for Ecuador, as Coca Codo Sinclair is a critical component of the country’s energy infrastructure, supplying a substantial portion of its electricity needs. The agreement to end the arbitration and the potential transfer of operation and maintenance to Power China could lead to improved performance and reliability of the plant, benefiting Ecuador’s energy sector and its consumers.
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