Dam project abandoned – Water prices could rise

Lack of resources and ongoing litigation has brought construction work on the Odelouca dam project to a complete standstill. Now, although there is no sign of any immediate resolution to the dispute, a plan for the Águas do Algarve water company (a subsidiary of Águas de Portugal) to take over the ownership of the dam, is gaining favour among the project’s co-ordinators. And this could mean that customers face a stiff price hike in their water bills.

Sources have revealed to The Resident that one of the repercussions of the problems surrounding the construction of the dam, located in the Silves area, is likely to be a major increase in bills to the consumer.Water costs could rise by as much as 12 cêntimos per cubic metre, representing an increase of 30 per cent over what is currently collected by Águas do Algarve.

Problems on the dam started when the building contractors, a Portuguese-Spanish partnership of Necso Entercanales Cubiertas and Construtora do Tâmega, downed tools last November, claiming they were owed 5.2 million euros in back payments from the project co-ordinators, the National Water Institute (INAG). In response, INAG took the contractors to court and tried to hand over administration to the state, in a bid to recover some of the construction equipment pending a resolution to the crisis. And there was another more pressing reason, why INAG wanted to transfer administration to the state.

Juvelino Almeida from INAG explained to The Resident: “Work stopped at a crucial stage, while a temporary dam with an overflow tunnel was nearing completion. This was necessary to protect the population downstream before the major work began. The temporary dam should have been 36 metres high but, at the time of the contractors ceasing work last November, it was only 30 metres. So we needed to call somebody else to complete the job and, in order to do this, the state has to take over administration.”

Now, in the latest litigious move, the contractor has obtained a ruling from Lisbon’s

Administrative Court ordering the suspension of the state’s involvement with the project – effectively ending any hope of work continuing on the dam, unless a private company can be persuaded to take over. And if a private company, such as Águas do Algarve, does take over, there is likely to be a sharp increase in prices.

So how did the project get into this mess? The original budget for the Odelouca dam was 113 million euros, 75 per cent of which was supposed to come from European Union funding.The other 25 per cent was to have come from Portuguese investment. The dam was designed to ensure that supply of water to the western Algarve never failed. But problems started in 1998 when the League for the Protection of Nature (LPN) approached the EU Commission in Brussels, arguing that Odelouca lies within a protected zone. The LPN claimed that the site of the proposed dam lay within a cordon of protected areas, a so-called ‘Environmental Net’, in which no major construction can be undertaken unless it is the public interest and unless there is clearly no alternative.

The LPN have been arguing that that there are alternative sources of water supply, but the National Water Institute clearly disagrees, and it on this crucial ruling, debated at Brussels’ Department of Environment, on which any decision regarding EU funding hinges. Work on the dam was further hampered when last year’s state budget failed to provide any financial backing for the project.

Political incompetence

Politicians across the Western Algarve have expressed their dismay at the fiasco surrounding the Odelouca dam. The president of Monchique Câmara, Carlos Tuta, has accused the Minister for Urban Affairs, Planning and the Environment, Amílcar Theias, of “political incompetence” and of not bringing enough pressure to bear on the European Union. And Manuel da Luz, President of Portimão Câmara, has gone even further, claiming that the minister, together with Prime Minister Durão Barroso, should go to Brussels to resolve the crisis.

Lack of funds

Meanwhile, INAG’s representative, Juvelino Almeida, has conceded that the contractors were justified in complaining about delays in payment. But he says they are overstating the amount owed and claims to have been surprised at the way they abandoned the project so abruptly. Speaking to The Resident, he claimed that the real figure owed is closer to 4.3 or 4.4 million euros and explained why his organisation had not paid the building consortium: “We could not pay them because we were supposed to receive the money from European Community funding. But then the LPN started an action against us in Brussels.” The LPN appeal against the dam meant that the EU funding was frozen and Almeida is not sure when a decision about whether Brussels will support the project will be made. “The Department of the Environment in Brussels is still studying the position, but it will take a long time,” he revealed. “Once we have the money, either from the EU or from the Portuguese government, then we will be able to pay the contractors what we owe them. We certainly accept we need to pay and, furthermore, our debt to the contractors accrues interest at a rate of 10 to 12 per cent every year.”

But Almeida went on to clarify why he felt INAG was justified in taking legal action against the contractors. “The contractors decided to do two things: they stopped work and also decided to break the contract. The law says that, if you don’t receive your money you have the right to stop work, but there is then a compensation period while attempts are made to resolve the issue. You can stop the contract or stop the construction, but not both. Instead, they stopped work and pulled out of the construction completely. They tried something illegal and took almost all their equipment away from the site.”

The dam was originally launched in 2002 by then minister José Sócrates. The target completion date was 2005, but the project was fraught with problems from the outset. Even before construction began, Sr Almeida concedes he knew there was a problem with funding: “But we decided to go ahead with the project. We thought the issue of European funding would be resolved within a short period of time and so we decided to go ahead with Portuguese money. We never supposed that years would pass by before the issue was finally resolved in Brussels.”

Now, in the light of the latest deadlock, those involved in the project are considering the possibility that the Águas do Algarve water company could take over the responsibility and ownership of the dam. Certainly this is an idea that municipalities in the western Algarve, which would have received water from the dam, are said to be considering. They are all, understandably, keenly interested in the construction of the dam and anxious to find a way out of the current impasse. The President of Portimão Câmara, Manuel da Luz, has confirmed that the proposed take-over by Águas do Algarve was “on top of the table” as far as he was concerned.

In the meantime, it appears that most of the parties involved have resigned themselves to the fact that the dam may not be ready in 2005. Almeida says work will continue on the dam “once we have the money from the EU or from the Portuguese government” but the chances of money coming from either source would appear, in the short term at least, to be slender.Others are even gloomier in their assessment.In the opinion of Monchique Câmara President Carlos Tuta, “it will not even be completed by 2008”.