OREANDA-NEWS. April 17, 2017. Ecuador's state-owned utility Celec has banned Russian state-controlled contractor Inter Rao from the country's public-sector procurement system for five years, a move that further delays the country's effort to reduce oil-fired power generation.

Celec is taking steps to terminate two separate equipment procurement contracts awarded to Inter Rao UES and its subsidiary Inter Rao-Export in 2010 and 2013, respectively, according to a 28 March statement that the latter sent to Argus.

Inter Rao-Export, which is the manager of both contracts, says it hopes to restart talks to forestall international arbitration. If the contracts are revoked, Ecuador could be forced to refund an outstanding $170mn debt to Russian banks, the firm says.

The pool of banks, headed by Roseximbank, agreed to lend Quito some $320mn to help fund Inter Rao's contracts for the long-delayed 253MW Toachi Pilaton hydroelectric project and the expansion of 130MW gas-fired power plant Termogas Machala to 308MW.

Toachi Pilaton, comprising 49MW Sarapullo and 204MW Alluriquin, should have started up in February 2015, but the date has been repeatedly delayed and was recently rescheduled to May 2018, according to electricity ministry documents seen by Argus.

The plant is one of eight hydroelectric projects worth $6bn that the outgoing administration of President Rafael Correa aimed to complete in 2015-16. A main objective of the campaign was to reduce the country's costly use of oil to generate power.

Construction contracts for the plants were awarded mostly to Chinese state-owned firms without bidding. Only three of the eight hydro plants - 1,500MW Coca Codo Sinclair, 487MW Sopladora and 60MW Manduriacu – are operating. The plants should help to reduce the power sector's demand for fossil fuels - mainly fuel oil and diesel - to 17,610 b/d in 2017 from 23,616 b/d in 2016, according to state-owned PetroEcuador's projections.

But the fresh project delays appear to have stalled the trend.

The Termogas Machala expansion was supposed to have been completed by March-April 2016. Smaller hydro projects are facing similar challenges. The 20MW Mazar-Dudas and 50MW Quijos should have started by March 2016, but construction of both is behind schedule after contractor China National Electric Engineering (CNEEC) was blacklisted from Ecuador?s public-sector procurement system in December 2015 over contractual violations.

Quito still plans to launch 275MW Minas San Francisco by June 2017, and 180MW Delsitanisagua in October 2017.

Quito's aimed to complete a major shift of its power matrix by 2016, when 93pc of the nation's power needs were to come from hydroelectricity, 6pc from thermal units and 1pc from non-hydro renewables.

Last year Ecuador generated only 57.6pc of supply from hydro plants. Thermal units fired by fuel oil, diesel and gas accounted for 40.15pc, with the balance from wind, solar and biomass, according to data from power regulator Arconel.