New agreement gives PowerChina operational control of Coca Codo Sinclair hydro plant after years of technical, ecological and legal issues.
Nineteen years after construction first began, and following investments of more than USD 3.2 billion, Ecuador’s giant Coca Codo Sinclair hydroelectric plant remains an unfulfilled promise. Operational since 2016, it largely fails to fulfil its 1,500-megawatt potential, all while the shadow of blackouts persists in the South American nation: in late 2024, as Ecuadorians suffered power cuts of up to 14 hours a day, the plant ran at only one third of its capacity. This year, the risk is latent: a severe drought is forecast, and once again, power cuts are expected.
The most recent twist in the story has political and diplomatic overtones. It came hours after Ecuadorian President Daniel Noboa’s official visit to Beijing at the end of June, where he met with his Chinese counterpart Xi Jinping.
Upon the delegation’s return, foreign minister Gabriela Sommerfeld announced Ecuador had reached an agreement with PowerChina – the parent company of Sinohydro, Coca Codo Sinclair’s builder – to take over operations at the hydroelectric plant.
As part of the agreement, the Chinese state-owned enterprise will pay USD 400 million in compensation. In return, the Ecuadorian government will end the international arbitration it initiated in 2021 to pursue USD 580 million in damages. The case had been brought due to structural defects in the hydroelectric plant: more than 17,000 cracks reportedly detected since operations began, as well as defective valves and poorly installed components.
Located between the Amazonian provinces of Napo and Sucumbíos, the megaproject was supposed to transform Ecuador’s energy mix and put an end to blackouts. Indeed, the project can cover around 30% of electricity demand, if and when it operates close to its potential. But after nearly a decade of fluctuating output and frustrations, the future of Coca Codo Sinclair remains uncertain. Some political figures are questioning the new deal, while ecological factors continue to pose challenges for the plant.
A concession to PowerChina?
From construction to operation, the saga of the Coca Codo Sinclair hydroelectric megaproject has spanned the terms of four Ecuadorian presidents: three terms of Rafael Correa (2007–2017), Lenín Moreno (2017–2021), the interrupted government of Guillermo Lasso (2021–2023) and the two terms of Daniel Noboa (2023-2025, 2025-2029).
For the government, this new agreement with PowerChina does not represent a concession or privatisation of the plant, “but a temporary management model to ensure the technical functioning of the system,” Ecuador’s energy minister Inés Manzano tells Dialogue Earth.
However, Manzano does not specify when the maintenance and operation of the hydroelectric plant will be transferred to PowerChina. It is currently run by the state through the Ecuadorian Electricity Corporation (Celec).
“This is only the first step in a broader process; there are still several legal procedures to be completed before the arbitration is finally closed,” the minister explains. “Among the next steps, three additional legal documents must be drafted and signed, and the attorney general’s office must issue its opinion. As part of the amicable solution, Sinohydro is expected to take over the maintenance and administration of the hydroelectric plant.”
The decision was not made at random: at least four ministries (of energy, finance, foreign affairs, and government) are reported to have participated in the negotiations at the highest level. Ecuador’s economy and finance minister, Sariha Moya, emphasises to Dialogue Earth that PowerChina will be paying compensation instead of a guarantee for the failures at the plant.
“PowerChina initially proposed to provide a guarantee that would be repaid as improvements were made to Coca Codo Sinclair,” explains Moya. “The Ministry of Economy clearly explained that the problem at the hydroelectric plant not only generated losses for the company, but also losses for the state. Therefore, we did not accept the guarantee, but rather compensation to the Ecuadorian state.”
The decision to hand over the operation of the plant to the same company responsible for its construction has, however, met with criticism from political figures outside the government. Dialogue Earth spoke to Ana Galarza, a former national assembly member: “In other words, PowerChina is paying USD 400 million for the Coca Codo Sinclair concession. Don’t try to fool us, or treat Ecuadorians like we’re naïve.”
“This new agreement raises questions about energy sovereignty, transparency and state capacity,” Galarza suggests. “The paradox is clear: the flagship project for changing the energy mix ends up being operated by the same company blamed for the failures that prevented it from doing so. Meanwhile, blackouts return and the erosion of the Coca River continues.”
Galarza is citing allegations that Coca Codo Sinclair has contributed to the erosion of the Coca River – which, most dramatically, became a topic of debate when the San Rafael waterfall, downstream of the plant, stopped flowing in 2020. However, researchers have cast doubt on the facility’s impact on this erosion, while the capacity of the plant itself has been hampered by it.
Having PowerChina take charge of the hydroelectric plant is the best possible solution, according to Inty Grønneberg, a mechanical engineer and scientist from Ecuador who has studied the evolution of Coca Codo Sinclair across two decades since its inception.
“It’s not about ideologising the project, but about solving problems,” Grønneberg tells Dialogue Earth. “It doesn’t matter if it’s administration, concession, or whatever you want to call it. Ecuador needs electricity, especially with a low water period already knocking on the door again.” In fact, even though Coca Codo Sinclair was only partially operational, during the low water period of 2024 almost one third of the country’s electricity still came from the plant.
Nature working against Coca Codo Sinclair
Designed to provide over 8,700 gigawatt hours of power annually – a third of national demand – the plant does not operate consistently, due in part to its status as a run-of-river plant (its intake is from a river diversion channel, rather than a reservoir) and its dependence on the flow of the Coca River.
In October 2024, it 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, according to Celec.
Furthermore, it is located in an area with high seismic activity and regressive erosion processes. In other words, it is a valley prone to natural disasters.
The conditions during the past winter in the Amazon increased the river’s flow, destroyed the containment works and deepened the riverbed, exacerbating the risk to the infrastructure.
The regressive erosion of the Coca River has destroyed nearby infrastructure and is close to reaching the hydroelectric plant’s water intake. Celec reported in the first week of July 2025 that the erosion was 4.7 kilometres from the intake. However, four weeks later, it had been reduced to only four kilometres.
According to Celec, the flooding also destroyed key structures such as rockfill walls, channel armouring and fill, which served to reinforce the slopes. It also washed away the beach that previously allowed people to walk along the riverbank, and deepened the undercut on the left bank, which now exceeds four metres.
From 2020 to the present, Celec has allocated more than USD 150 million to studies, design, consulting and engineering works related to the erosion of the Coca River.
Sinohydro was in charge of the project’s construction, backed by a USD 1.7 billion loan from the Export-Import Bank of China, but it ended up costing more than double that amount. The loan came with conditions, such as the hiring of a Chinese construction company to carry out the project – the same company that will now be responsible for operating an energy project that has brought constant headaches to the Ecuadorian state.
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