Mammoth China Dam Project Called Risky, Destructive

Just before the arrival here of Chinese President Jiang Zemin, seven environmental groups sent a joint letter to the largest shareholders in General Electric Company. Their action follows last month's announcement that General Electric Canada, a wholly-owned subsidiary of the Connecticut-based corporation, was awarded a contract to supply turbines and generators for China's Three Gorges Dam project.

"General Electric shareholders are getting involved in the riskiest and most destructive dam project ever," according to the groups, who represent 900,000 supporters across North America. They include Probe International, Friends of the Earth USA, International Rivers Network, Defenders of Wildlife, and Sierra Club.

The letter asks "whether the human rights abuses, environmental destruction, and economic risks associated with the Three Gorges dam are consistent with (shareholders) investment policies,"

"What's bad for China could be bad for GE," says Patricia Adams of Probe International, the letter's main author. "We think shareholders should know about the risks their company is taking."

Asked for the company's reaction to the letters, GE Canada spokesman Paul Jasot would say only: "Just as we have a right to bid on these contracts, these groups have a right to comment on the project involved."

Since the beginning of its development, the dam has met with opposition and criticism. Scheduled for completion in 2009, the dam would create a gigantic reservoir in the middle of the Yangtze -- China's longest river -- displacing more than one million people.

Proponents of the dam claim it will generate needed electricity, provide flood control and ease navigation on the Yangtze. At peak load, 26 turbines of perhaps 400 tons each, the largest ever built, will generate 18,200 megawatts of electricity, equivalent to 18 nuclear power plants.

Environmental experts, however, predict that the two kilometer-wide dam, which is being built over several seismic faults, will actually cause flooding and disrupt navigation. In addition, critics say the Yangtze's massive silt load poses a significant risk of severe sedimentation that could render the reservoir useless for power production.

The forced resettlement of more than a million people, without the opportunity for public review and due process, will lead to great civil unrest, say critics. According to an internal Chinese security document, leaked in 1995, "civil disputes, violent fights, and massive armed melees" are expected during the forced relocation at Three Gorges.

In 1990, China's Ministry of Water Resources admitted that 30 to 40 percent of the 10 million people who have been relocated to make way for hydroelectric dams since the late 1950s are still impoverished.

To deal with the public opposition, the ministries of Public Security and State Security have been directed to strengthen the "combat-readiness needs of all units in the Three Gorges area" and to "enforce a swifter and heavier punishment policy, especially against any conspiracies aimed at disturbing the construction of the Three Gorges dam."

While the Chinese government claims the dam will cost $17 billion, the financial press has put the cost at closer to $27 billion. Some estimates go as high as $75 billion.

Much of the financial dealings have revolved around a consortium including GE Canada, led by Siemens AG and Voith Hydro GmbH of Germany, will provide six of the 14 turbine generator units to the project at an estimated cost of $320 million. The other eight units, estimated at $420 million, will be supplied by Anglo-French group GEC-Alsthom NV, Asea Brown Boveri (ABB), the Swiss conglomerate, and Norway's Kvaerner Energy A.S.

Many international lending institutions have refused to help finance the project, largely because of concern over potential environmental problems and questions about the dam's financial viability.

In 1993, the world's foremost dam-building institution, the United States Bureau of Reclamation, withdrew from the project after supporting it for 50 years, stating that the dam is "not environmentally or economically feasible."

The U.S. Export-Import Bank decided against financing U.S. corporations seeking Three Gorges contracts because the dam failed to meet the bank's environmental guidelines. Even the World Bank, by far the largest public financier of dam projects worldwide, has warned that the pool level of the 660 kilometer-long reservoir will not be an economically viable proposition.

Commercial banks and finance companies stepped in and, in January, backed a $330 million Yankee bond issue by China's State Development Bank (SDB). Whereas these investments are in essence loans to the Three Gorges Project Development Corporation, and therefore not subject to fluctuations in the stock market, investors in companies like GE could see the value of their shares fall if the company turns out to have made a bad gamble, analysts say.

Opponents, both in China and abroad, say that the region would be better served by a series of smaller dams on Chang Jiang tributaries but, ironically, the Chinese Minister of Energy admits that China does not need new energy sources and that it could reduce energy consumption and double its GNP with conservation and efficiency improvements.

To reduce its reliance on coal, China could also meet its energy needs more quickly and at a lower cost with super-efficient combined cycle power plants -- a technology more environmentally benign and commercially viable than the Three Gorges dam, say environmentalists.

"General Electric's combined cycle plants would contribute to China's sustainable energy future and serve General Electric's profitability at the same time," says the letter to GE shareholders.