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    Inland Energy claims $289 million for GRA noncompliance

    January 18, 2022 - CE Noticias Financieras


      At 2:48 p.m. yesterday, another time bomb, triggered by the eventual cancellation of the contract for the Majes II project, entered the virtual desk of the Regional Government of Arequipa (GRA). It is a letter signed by the company Inland Energy that proposes direct treatment. This procedure seeks to resolve the controversy originated "due to the non-compliance of the GRA's obligations to supply water for Majes II" for the development of the energy component. Inland Energy belongs to Luz del Sur. This company, in 2018, obtained the concession to build the Lluclla hydroelectric power plant in the highlands of Arequipa. It then commissioned this concession to Inland.

      The plan was to run the energy project with the more than 30 cubic meters derived to the pampas of Majes and Siguas. Lluclla was projected to generate 300 megawatts. This is established in the contract signed with the Arequipa government. "Inland strongly rejects the GRA's non-compliance and initiates this direct agreement to safeguard its rights", states the letter, also copied to the Ministry of Economy and Finance. They warn that without an irrigation component it is impossible to develop their hydroelectric project. According to the document, they already have environmental and archeological permits and certifications ready from the Economic Operation Committee of the National Interconnected System.

      The company claims to have submitted a letter of guarantee to the Ministry of Energy and Mines as a guarantee to carry out the project on schedule. They fear that if the work is not carried out, the bond could be executed. They also state that the lack of clarity regarding the destination of the work has caused several contractors to leave. "Inland carried out the preparatory activities for the construction of the hydroelectric plant and is carrying out the financial structuring to begin construction", it is specified. The text accuses the GRA of having unjustifiably prevented the completion of the major irrigation infrastructure by not signing Addendum 13.

      The non-signing of this addendum to the contract caused the withdrawal of the concessionaire Angostura-Siguas. This business group, formed by the Spanish company Cobra, initiated the expiration of the concession contract for the work. The signing of Addendum 13 has the approval of the Ministry of Economy and Finance, Proinversion and some non-binding observations from the Comptroller's Office. The Regional Council of Arequipa is the last filter to approve it. However, several of its members resisted to discuss it in the midst of controversy.

      What they claim

      In view of the non-compliance, the power generator is demanding a solution to the stoppage of the hydraulic works in charge of Angostura Siguas.

      However, if this solution is not successful, they are demanding the payment of consequential damages amounting to $ 9 million. This concept corresponds to restitution of payments and investments already made for Lluclla. In addition, $280 million for lost profits, which the company will not receive if the power plant is interrupted.

      Inland Energy's representative, Mile Cacic, recalls clause 19.5 of the contract: if no consensus is reached in the direct agreement, the next step will be an international arbitration administered by the International Centre for Dispute Resolution, which is the International Division of the American Arbitration Association, United States. The contents of the letter do not rule out the initiation of legal action against officials and those responsible for blocking the execution of the water works.

      Board members ask not to be pressured

      Inland Energy's warning to file an arbitration against the Regional Government of Arequipa (GRA) for the construction of the Lluclla hydroelectric power plant did not go down well with two regional councilors. José Luis Hancco, president of the Regional Council of Arequipa (CRA) described as a media campaign the one undertaken to have addendum 13 of Majes II approved. "I suggest that the issue has to be dealt with immediately (addendum 13). I sincerely consider that there is a kind of harassment. We have millions invested, however they want to sue us for 200 million (dollars) and the hydroelectric companies for 300 million. Why would the hydroelectric companies sue? Do we have a relationship with them, have we granted the concession? No," he said.

      For the president of the Agriculture Commission, Elmer Pinto, the warning has no basis. "They claim 300 million dollars. They have not invested a single sol and want to sue. It is unjustified.


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