World Bank approves loan for Cameroon’s Lom Pangar dam

 

Once again the World Bank has signed on to a high-risk project with questionable poverty-reduction potential.

Of course, reading the press release from the World Bank, you would never guess that this project could be anything less than wonderful:

WASHINGTON, March 27, 2012 – The World Bank’s Board of Executive Directors today approved US$132 million in zero-interest financing for Cameroon’s Lom Pangar Hydropower Project (LPHP), to support the country’s economic development and significantly improve the supply of electricity to homes and businesses across Cameroon.

Together with the African Development Bank (AfDB), the Central African States Development Bank (BDEAC), the European Investment Bank (EIB) the French Agency for Development (AFD), and the Government of Cameroon, the project will finance the Lom Pangar dam to store water during the rainy season and later release it during dry periods, to increase all-season hydropower generation capacity on the Sanaga River by approximately 40 percent.

The immediate benefit for Cameroonians will be a 120 MW increase in electricity generation at two existing hydropower plants which will improve the reliability of power supply for up to five million Cameroonians and help to lower the cost of power. Electricity supply is often erratic, with frequent power cuts especially during the dry season.

Cameroon’s Lom Pangar dam project has been in the works for well over a decade. The dam’s construction came up during the debate over World Bank funding for Chad-Cameroon Development Project as the (proposed) Lom Pangar dam would flood a section of the (proposed) pipeline route. The pipeline was constructed, of course, and the Lom Pagnar Dam will flood two sections of the pipeline, requiring approximately 25 km of reinforcement. The World Bank project appraisal document outlines the interaction between the dam and the pipeline:

28. Oil Spill Risk in the Reservoir. The project reservoir will flood approximately 5 kilometers of the Chad-Cameroon pipeline. This creates the risk of an oil-spill in the reservoir and requiring pipeline adaptation and changes to the existing ESMP of the CCP. The reservoir created by the LPHP will require rebuilding two 12 kilometer  stretches of the CCP where they cross the enlarged Pangar River. Technical and environmental studies on alternative pipeline routings have been completed and a technical option for the adaptation has been adopted. The GOC has agreed to pre-finance the adaptation works which will be carried out by COTCO. An Environmental and Management Plan (EMP) has been prepared by COTCO for the pipeline adaptation according to Bank Group standards and the existing ESMP of the pipeline will be amended to ensure that its implementation remains compliant. To manage the risk of an oil spill into the reservoir, COTCO has updated the Area Specific Oil Spill Response Plan and the National Hydrocarbons Society (SNH) has finalized the National Oil Spill Response Plan. The pre-financing agreement, the EDC Cooperation Agreement, and the MoU COTCO and MINFOF regarding Right of Way (ROW) for maintenance activities in the vicinity of the Deng Deng National Park have been signed on February 17, 2012, to ensure compliance with the requisite environmental and social 114safeguard measures.

Increased oil spill risk is just one of many environmental and social risks associated with the Lom Pangar Dam, which in the words of the World Bank is, “a high-risk, high-reward project, where successful implementation and realization of the project’s development objective will require intensive supervision. The World Bank is well positioned to support the GOC in developing this strategic project in an environmentally sustainable and socially equitable manner by not only providing financing but also expertise and access to international good practice.”

The World Bank has rated the project Category A as per its safeguard policy on Environmental Assessment. This is the highest risk category and the Bank admits the project will have,”significant environmental and social impacts,” that will require various interventions to assess, minimize and mitigate them.

The Bank’s Safeguard Data Sheet outlines some of the environmental impacts:

The project will have significant impacts on natural habitats, both during construction and operation of the dam. The reservoir will flood approximately 537 km2 of natural habitats, including approximately 300 km2 of natural forest. The cumulative footprint of the construction sites (apart from the reservoir) cover approximately 4,000 hectares that will be converted from forest to other uses. Indirect impacts on natural habitats could in the long term be more significant than the direct impacts. They include loss of biodiversity because of poaching or habitat fragmentation by the road network, including any roads built for the salvage of wood from the reservoir before it is filled, and the expansion of agriculture into forest areas. The construction phase might trigger a process of agricultural penetration into the Deng Deng forest that could perpetuate itself long after commissioning of the dam and could significantly reduce the integrity and ecological functions of the forest. The reservoir will transform a terrestrial ecosystem of forest and savannas along a river into a lake ecosystem subjected to strong seasonal variations in water levels. While the ESA indicates that none of the flooded terrestrial habitat is critical, the dam site is located next to portions of the Deng Deng forest that include critical habitats, particularly because of the presence of a viable population of gorillas and a significant population of chimpanzees. The environmental significance of the Deng Deng forest was identified in the context of the Chad-Cameroon Pipeline Project and led to the pipeline’s realignment to avoid critical habitats. gradual degradation of the Deng Deng forest could lead to the extinction of its gorilla population.

(I have highlighted the sentence about the Deng Deng forest as it’s rather ironic that the pipeline route was modified in order to get World Bank support for that project.)

Approximately 30,000 people live in the area that will be affected by the dam and many will have to be resettled. Additionally an influx of people from surrounding areas is expected during construction — this will likely put additional pressure on the environment and increase a number of health risks. The World Bank has its resettlement plan on the project webpage: Abbreviated Resettlement Plan.

OK. So the project is risky, but what about all that electricity? Isn’t it important to bring electricity to five million Cameroonians?

Bringing electricity to Cameroonians is critical for the country’s economic development; there’s no doubt about this. The issue is whether the Lom Pangar dam will do this.

For years, critics of the project have pointed out that much of Lom Pangar’s electricity may very well end up going to Rio Tinto’s aluminum smelting operations. Here’s an excerpt from a 2006 report, In Whose Interest?, prepared by Global Village Cameroon,  Bank Information Center and International Rivers Network

There is little dispute that Cameroon needs to develop more energy. But just how much energy is required, for whom, and how it should be generated, remain contested issues. Although no comprehensive national energy demand and options assessment has been conducted and no energy sector development strategy has been published, the government of Cameroon has identified the construction of the Lom Pangar Dam on the Sanaga River basin in eastern Cameroon as a top solution to the country’s energy crisis.  While most of Cameroon’s population (over 80% in rural areas) does not have access to electricity, the urban and rural poor do not appear to be the primary beneficiaries of the Lom Pangar project. Instead, the dam is designed to regulate the flow of the Sanaga River in order to increase energy production from existing and proposed downstream hydropower plants serving the southern electricity grid and the country’s single largest electricity consumer, the Alucam aluminum smelter.  Jointly owned by the government of Cameroon and the Canadian-based company Alcan, Alucam plans to more than double its production and needs new sources of cheap energy to do so. In October of 2005, Alcan publicly stated that  the company’s future in Cameroon rests on the construction of the Lom Pangar Dam. This demand provides the government with a strong incentive to push the Lom Pangar project forward. Recent support from the French and German development agencies for new environmental impact studies and technical assistance from the World Bank, are helping the government to prepare the $200 million project for financing.

A 2009 article, Dam Project Questioned, published by IPS provides specific details on Alucam’s need for electricity:

In June 2008, the Electricity Development Corporation (EDC) and Rio Tinto-Alcan, owners of ALUCAM, signed an agreement which lays out modalities for eventual water purchases by the aluminum company. The agreement will allow construction of another power-generating dam downstream at Nachtigal, and ALUCAM’s managing director, Titi Manyaka, was quite up-beat.

“This is a major development for ALUCAM. We have been longing to expand production from 90,000 tons per year to 300,000 tons. We couldn’t because of inadequate power supply.”

Acute power shortages have forced the aluminum smelter to scale down output by nearly 40 percent. According to Manyaka, ALUCAM needs 180 MW to operate at full capacity. Supply however dropped to 120 MW in 2009.

ALUCAM sources say production this year could drop to just 55,000 tons.

“This is why the Lom Pangar Dam is important to us,” Jacques Dubuc, spokesperson for Rio Tinto-Alcan operations in Europe, the Middle East and Africa, told IPS during a recent visit to Cameroon.

I would certainly be interested in hearing more from the Bank about Alucam’s energy demands and how this will affect the “five million people” who may benefit from this project. Page 35 of the World Bank project appraisal discusses consumer vs. industrial use of electricity: “The benefits of the LPHP and subsequent hydropower schemes depend on how the resulting power is allocated between public supply and industrial users, because of the wide variation in willingness to pay for power across different user group.”  The report acknowledges that ,”a share of the increased power produced from the Lom Pangar and other hydropower projects will be consumed by the energy-intensive aluminum industry,” but at this point, the allocation of power is not clear.

The Lom Pangar dam was moving forward already (China International Water and Electricity company won the construction contract and is on-site). I can imagine that World Bank officials will stress how Bank involvement will help minimize and mitigative negative impacts. The “it would be worse without us” argument is common at the World Bank.

 

This entry was posted on Thursday, March 29th, 2012 at 4:24 pm.