Belo Monte Contractors Raise Price Tag of Controversial Amazon Dam

Brasilia, Brazil – The daily difficulties faced in the construction of the Belo Monte hydroelectric dam in the state of Pará have expanded beyond the confines of its construction site and reached the negotiating table of the companies in charge of building it. The most recent development is the tension between the Belo Monte Construction Consortium (CCBM), which gathers the contractors responsible for building the plant, and the owner of the project, the Norte Energia consortium.

Valor has learned that CCBM has been trying since the end of last year to negotiate an amendment to the contract signed with Norte Energia. Six months of discussions have gone by but the deal has not progressed. CCBM is charging an extra R$1 billion to Norte Energia. If granted, it will be the first amendment of the contract, originally signed for R$13.8 billion.

CCBM is led by construction company Andrade Gutierrez, followed by partners Odebrecht and Camargo Corrêa, and seven other contractors with smaller stakes. On the other side of the negotiating table is state-owned giant Eletrobras, which holds 49% of Norte Energia, followed by pension funds Petros and Funcef, with 10% each. Neoenergia, Amazônia (Cemig and Light) and Vale are also part of the consortium, together with other minority shareholders.

CCBM declined to comment on the matter. Norte Energia said through a statement that it "will not comment on any contract negotiations with suppliers."

The pressure tends to increase. Claims made by contractors are based primarily on extra costs created by the wave of strikes faced in the project's almost two years of existence, in addition to concessions on benefits and salaries granted by CCBM in labor agreements. Work at Belo Monte has already been down for a total of 90 days and estimates suggest that for every such day there's an additional R$10 million cost to the project.

Regarding labor issues, one of the agreements with unions was that the company would allow more downtime for its employees. Initially, each employee was entitled to spend a week at home every six months. Since last year, however, the wait has been reduced to three months. Moreover, the company can't just send employees on leave. It has to be responsible for the cost of transporting them either by bus or plane. And it also has to strictly comply with the schedule, even if it means hiring more employees to ensure that work is completed. Belo Monte today has 23,000 employees and that number will jump to 28,000 by October, being likely to reach 30,000.

The most interested party in performing the work on schedule is CCBM, since payments are made in accordance with the delivery of services. As each job step is completed, Norte Energia visits the site to check and measure the work before paying for the portion that was performed. Depending on the amount of rain in the Amazon region between the months of November and April, the performance of contractors may drop dramatically, and with it, the payments.

In its own way, Belo Monte is already repeating the narrative of the construction of hydroelectric Jirau, currently being built on the Madeira River near Porto Velho (Rondônia). In this case, however, financial negotiations between construction company Camargo Corrêa and Energia Sustentável do Brasil (ESRB) consortium ended up in court because of disagreements over who should cover the losses caused by acts of vandalism that more than once destroyed worker accommodations.

With 11,200 megawatts of installed capacity and estimated to cost R$28.9 billion, Belo Monte accounts for 33% of Brazil's planned expansion of generation capacity between 2015 and 2019. The first 24 plant's turbines are expected to start operating in February 2015, with the last one going online by January 2019.

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