The Inter-American Development Bank (IADB) has approved a US$87.8mn loan for the construction of the Baba dam, at the confluence of the Baba and Toachi rivers, equidistant between the cities of Quito and Guayaquil in Ecuador.


The project consists of the construction, operation and maintenance of the dam and the construction of a 8km. diverter from the reservoir formed by the dam to the Daule Peripa reservoir and the Marcel Laniado de Wind (MLW) generation plant.


The MLW plant uses only 80MW of its total installed capacity of 213MW. The objective of the project is to allow for the use of the idle installed capacity of the MLW plant in order to generate an additional average of 388GWh of energy per year.


“Ecuador suffers from a deficit in hydro-generation investments, and its capacity to cover current demand is decreasing,” says project team leader, Jean-Marc Aboussouan. “This shortfall, combined with rapidly increasing demand for energy due to a growing economy, electrification and urbanisation means Ecuador must import increasing amounts of electricity.”


According to Aboussouan, the additional energy the MLW plant will be able to generate after construction of the Baba dam represents approximately 22% of the country’s current electricity imports.


The total cost of this public-private partnership project is around US$195.2mn. The private sector will contribute both capital and debt financing. Its key participant is the Brazilian company Odebrecht Investimentos em Infra-Estrutura (OII). The public sector will contribute through revenues generated from the existing energy produced at the MLW.


The IADB’s participation has contributed significantly to the project’s environmental and social management, particularly as it relates to the design of an adequate compensation and resettlement plan, developing a more integrated and effective environmental management system and helping develop innovative solutions to water issues downstream of the dam, explains Aboussouan.


The bank and other project shareholders have held various public participation events, including consultation on original project design and meetings about the adopted alternative design.


The alternative project design proposed by Odebrecht has allowed for substantial reduction in land acquisition and resettlement. Instead of 240 families that would have had to be relocated in the original design, only 43 families will have to be relocated; and land acquisition is limited to 1,099 hectares compared to the original 3, 760 hectares.


Under the adopted design, no protected areas or ecological sensitive habitats will be affected.


Construction of the Baba dam is expected to last two years.