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DAM-L LS: Xiaolangdi Dam Fails to Find Customers (fwd)



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subject: LS: Xiaolangdi Dam Fails to Find Customers
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Henan dam fails to find customers
Jasper Becker in Beijing
South China Morning Post
October 19, 2000

China's US$4 billion (HK$31 billion) dam in Henan province across the 
Yellow River has been unable to find customers for its electricity, 
according to its vice-general manager, Wang Xianwu.

"We haven't been able to negotiate a contract. There's an oversupply of 
electricity and we cannot agree on a price," he said.

The massive Xiaolangdi project, backed with US$1 billion in loans from the 
World Bank, is largely designed to trap sediment and control flooding in 
the middle and lower reaches.

Mr Wang admitted that electricity generation and flood control were 
conflicting aims. Although the first two generators could have begun 
operating earlier this year, the start of electricity generation was 
delayed by three months.

The reservoir had to be emptied to provide water downstream in the middle 
of a major drought that has hit Shandong province and other parts of the 
region. Shandong this year had its worst drought since 1916.

The amount of rainwater running into the river is now a third of what it 
was in the 1980s. Last year, the river failed to reach the sea for 200 
days, compared to 110 days in 1995.

Despite the growing pressure on water resources, plans have been announced 
to divert more Yellow River water, this time to solve the drastic water 
shortages affecting Tianjin.

Xiaolangdi, one of 12 dams already built on the Yellow River, failed to 
prevent serious flooding this summer. Henan province reported losses of 
nearly eight billion yuan (HK$7.5 billion), with damage to 215,000 houses 
and the inundation of millions of hectares of land. The province said 22 
million people in 15 cities were affected by this year's floods.

The economic viability of the dam, which has presented difficult 
engineering challenges and the import of costly equipment and know-how, is 
threatened by an electricity glut. Henan is trying to close many of its 
small coal-mines and has no need of extra generating capacity to supplement 
its coal-fired power-stations.

Two more generators will come into operation this month and by 2001, 
Xiaolangdi managers are confident the planned 18,000MW will be being 
produced, equal to nearly 20 per cent of the province's needs.

Power generation was added to the project in order to reduce the need for a 
polluting coal power station, but the Xiaolangdi Dam is demanding too high 
a price for its electricity.

Provincial officials hope to solve the problem by slashing rural 
electricity tariffs from this year and by constructing a national grid and 
market pricing system which will enable Henan to export its surplus 
electricity to coastal regions. Henan plans to add a further 30,000MW of 
generating capacity by building more power stations.

The complex project has been dogged by other problems, including disputes 
with two of the main foreign contractors, Impreglio of Italy and Zublin of 
Germany. Mr Wang said the dispute with Zublin, which started four years 
ago, had gone to arbitration.

"I am very angry about it. I don't want to say more," he said.

A further cost has been the need to relocate 180,000 people from the 
reservoir area. Mr Wang said their living standards had improved. But no 
independent assessment had been made and supervision was in the hands of 
the project engineers.

Copyright (c) 2000. South China Morning Post Publishers Ltd. All rights 
reserved.



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