Ecuador rescinds controversy over dam construction with China, as project faces ongoing disagreement
The government of Ecuador has reached an agreement with PowerChina, the parent company of Sinohydro, the builder of the Coca Codo Sinclair hydroelectric plant, to take over operations. This decision comes after a series of challenges faced by the plant, including temporary suspensions and reduced capacity.
The agreement was finalized following an official visit by Ecuadorian President Daniel Noboa to Beijing in late June, where he met with Chinese counterpart Xi Jinping. The new management model is aimed at ensuring the technical functioning of the system, and it does not represent a concession or privatization of the plant.
The Coca Codo Sinclair hydroelectric plant, constructed over 19 years and costing over USD 3.2 billion, has been hampered in its capacity due to its natural environment and location. In October 2024, the plant operated at 39% of its capacity; in July 2025, it was temporarily suspended due to sediment accumulation after heavy rains; and in the first seven months of 2025, it has been out of operation 19 times.
To address the issue of erosion of the Coca River, Celec, the Ecuadorian state electricity company, has allocated more than USD 150 million to studies, design, consulting, and engineering works from 2020 to the present.
PowerChina will pay USD 400 million in compensation to Ecuador in this agreement. The regressive erosion of the Coca River has destroyed nearby infrastructure and is close to reaching the hydroelectric plant's water intake. The plant, designed to provide over 8,700 gigawatt hours of power annually, a third of national demand, has not been fulfilling its 1,500-megawatt potential in Ecuador.
Inty Grønneberg, a mechanical engineer and scientist from Ecuador, believes that having PowerChina take charge of the hydroelectric plant is the best solution to ensure electricity supply. However, concerns have been raised by some, including Minister Galarza, about energy sovereignty, transparency, and state capacity with the new agreement.
Several legal procedures must be completed before the arbitration initiated by Ecuador in 2021 to pursue USD 580 million in damages is finally closed. These include the drafting and signing of three additional legal documents and the attorney general's office issuing its opinion.
The Coca Codo Sinclair hydroelectric plant is located in an area with high seismic activity and regressive erosion processes, making it prone to natural disasters. A severe drought is forecast for this year, and power cuts are expected. Despite these challenges, during the low water period of 2024, almost one third of Ecuador's electricity still came from the Coca Codo Sinclair plant, even though it was only partially operational.
At least four ministries (of energy, finance, foreign affairs, and government) reportedly participated in the negotiations at the highest level. The Ecuadorian government will end the international arbitration it initiated in 2021 with this agreement.
