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Identifier
Created
Classification
Origin
02TEGUCIGALPA2857
2002-10-11 15:43:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tegucigalpa
Cable title:  

EMBASSY ADVOCACY FOR AES AS THE DECISION ON THE 210

Tags:   ENRG  EPET  EINV  ECON  HO 
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						UNCLAS TEGUCIGALPA 002857 

SIPDIS

SENSITIVE

GUATEMALA FOR COMATT: DTHOMPSON
STATE FOR WHA/CEN

E.O. 12958: N/A
TAGS: ENRG EPET EINV ECON HO
SUBJECT: EMBASSY ADVOCACY FOR AES AS THE DECISION ON THE 210
MW CONTRACT APPROACHES

REF: a) 01 TEGUCIGALPA 2872, b) TEGUCIGALPA 02207



1. (SBU) The Embassy continues to advocate strongly for a
transparent process that will treat American investors
fairly, as the state electricity company ENEE's decision on
the winner of the 210MW electricity tender approaches.
ENEE's decision, like the bid opening itself (ref b), has
been postponed several times. It now appears that the
announcement may occur by October 14. Rumors continue to
swirl of corruption and political intrigue. High level GOH
officials were surprised by the unexpectedly low prices bid
by the domestic companies. AES is the only U.S. firm to bid
on the project; if AES wins the bid, this power contract
will allow it to proceed with financing and construction of
its LNG-fuel combined-cycle El Faro project. With its usd
650 million investment, its low cost per kilowatt hour and
its benefits for regional integration, the project would be
a boon to Honduras.



2. (SBU) In response to advocacy requests by AES throughout
the summer and fall, Emboffs have taken all available
opportunities to demonstrate USG interest in the fairness of
the process. On Monday, October 7, then-Charg d'Affaires,
Roger Pierce spoke with Luis Cosenza, Minister of the
Presidency, to raise the issue of the energy bid and
emphasize the importance of a fair and transparent process.
A followup conversation is planned for October 11.



3. (SBU) Econcouns reinforced this message with Presidential
Advisor Ramon Medina Luna on October 7, and with Investment
Minister, Camilo Atala, on October 10. She emphasized the
importance of the project as an indication of Honduras'
ability to attract sizable foreign investment. She flagged
the possible timing problem of an announcement occurring
after the President, Luis Cosenza, Camilo Atala and other
high level officials leave the country for a trip to Europe
and Asia (providing more opportunity for undue pressure).
Atala indicated that the GOH intends to have the
announcement occur before President Maduro's departure for
Europe on October 15 for that very reason. Finally, she
asked if it were possible that a firm that did not comply
with all the tender requirements could be declared winner (a
veiled but clear reference to the rumor that is circulating
that AES's closest competitor, Lufusa, omitted from its
offer a commitment to build a usd 20 million transmission
facility). Atala acknowledged familiarity with this issue
and responded that such a firm would be disqualified.



4. (SBU) Also on October 10, Emboff was in contact with the
Commerce Department advocacy center and AES local
representative, Carlos Pineda, to confirm appropriate
wording for a possible advocacy letter for AES to be sent to
President Maduro from Commerce Secretary Evans. The letter
emphasizes the proposed AES plant would be a regional power
facility, supplying power to Honduras, El Salvador,
Guatemala and elsewhere. It cites the benefits in terms of
job creation, lower cost of electricity, and the
introduction of an environment friendly fuel, liquid natural
gas. The letter continues on to request that the bid
process be followed strictly, that all participants have a
level playing field and that there be maximum transparency.



5. (SBU) Background: Since the bid opening, there has been
a raging war in the press between the two most competitive
bidders, AES and the Honduran firm Lufusa (ref b). As the
contest entered the endgame, there have been increased
rumors and allegations of Honduran firms offering bribes.
The lack of a disqualification of Lufusa, because of its
failure to include the cost of building a new substation and
associated transmission lines, worried local AES reps that
the intrigue might be yielding fruit. Embassy strategy has
been to ensure that the GOH is fully aware that the USG is
watching the process closely and aware of the details.
Opponents of the AES project have also advocated
disqualification of the U.S. company because of financial
setbacks of its parent company.



6. (SBU) Embassy will continue to engage high-level GOH
officials on the importance of the transparency and fairness
of the tender process, fair treatment of U.S. investors such
as AES, and the benefits of the El Faro project.
Palmer