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    The project

    The EIB financing focuses on the power component and socio-economic infrastructure of a multipurpose hydro scheme on the Guadiana River, primarily designed to remedy a chronic water shortage in the Alentejo region (Portugal), one of the poorest, driest and least developed areas in the European Union. Although central to the overall regional development programme established by the Portuguese authorities for the region, EIB financing does not include the well-known Alqueva Dam, which was already fully financed by State and EU Structural Fund grants prior to EIB involvement in the power and infrastructure project.

    Specifically, the four components of the project financed by the EIB are, the construction of the hydro-power station on the river Guadiana, the downstream secondary reservoir at Pedrogão, the reconstruction of 33 km of new road infrastructure and the relocation of the village of Aldeia da Luz, including modern utilities and communications systems and provision of a primary waste water effluent treatment plant.

    EIB decision to finance

    In June 1999, EIB's Board of Directors approved a EUR 135 million loan for the project. Loan tranches were signed with the promoter EDIA - Empresa de Desenvolvimento e Infra-Estructuras do Alqueva, SA - on 13/12/1999 (EUR 70 million) and 08/06/2001 (EUR 65 million).

    The EIB's main considerations for financing the project were the catalytic nature of the investment, its pivotal role in the redevelopment of a depressed region located in an Objective 1 area, and accordingly, the high priority of the scheme in the EU's programme of structural investments in Portugal. In addition, the hydro-power component financed by the Bank contributed to generate financial and socio-economic benefits for the overall project, reduce reliance on imported energy and generated power that is cleaner than that produced from alternative peaking plants.

    Environmental issues

    As a general rule, EIB requires project promoters to obtain all legally required environmental consents and planning permissions and compliance with relevant environmental legislation.

    In this particular case, a fully-fledged Environmental Impact Assessment (EIA) was required according to EU Directives. This was done prior to the Bank's Project Appraisal by the promoter with the support of the Commission, and all formal requirements, including extensive public involvement, were met.

    The project required mitigating measures which were agreed and carried out during implementation or after completion. The programme of these measures is presently being implemented by EDIA under the supervision of an environmental commission (CAIA) consisting of representatives of interested governmental and professional bodies and NGO's. The scope of the programme and the proposed mitigating measures was reviewed by the EIB during appraisal and found to be appropriate.