WIDESPREAD INTEREST IN INGA DAM DEVELOPMENT

C O N F I D E N T I A L KINSHASA 002062

SIPDIS

E.O. 12958: DECL: 11/09/2014
TAGS: ENRG EINV ECON PREL PGOV CG
SUBJECT: WIDESPREAD INTEREST IN INGA DAM DEVELOPMENT

Classified By: Econoff Peter Newman for reasons 1.4 b/d


1. (C) Summary: The Ministry of Energy continues to receive
proposals for the development of Inga Dam. The most recent
developments have been an MOU signed with Eskom of South
Africa and negotiations with MagAlloy (with Reynolds Group
participation). The MOU signed with Eskom is one step closer
to the formalization of the Western Corridor (Westcor)
project. It is not yet official and binding, awaiting
Presidential approval. MagAlloy does not yet have an
agreement with the GDRC but is negotiating for participation
in a consortium for the rehabilitation of Inga I and Inga II
in return for guaranteed supply to a potential magnesium
smelter in Pointe Noire, Congo-Brazzaville. Reynolds Group is
also currently in negotiations to participate in the
consortium. End summary.


2. (C) DRC Minister of Energy Jean-Pierre Kalema Losona
signed a MOU with Eskom (South African electricity
parastatal) for the Western Corridor (Westcor) development
project in mid-October. (Note: Westcor is a international
group formed by the electricity companies of the RSA,
Botswana, Namibia, Angola, and the DRC. Its objective is the
development of Inga to export electricity to Southern Africa.
End note.) The MOU concerns only the future development of
Inga III and Grand Inga. Inga III would bring the system's
total installed capacity to 3,500 MW, while Grand Inga,
though only a possibility in the very long-term, would raise
the installed capacity to 40,000 MW. The MOU has an exit
clause that was written to allow for annulment of the MOU
with 30 days notice (NFI). The MOU is not official and
binding as far as the GDRC is concerned, until the Economic
and Finance Commission (EcoFin) and President Kabila sign off.


3. (SBU) The Ministry of Energy is attempting to corral all
players in the rehabilitation of the pre-existing Inga I and
Inga II dams into one consortium. Reynolds Group (with
partner Rusal) and MagAlloy are now jointly pursuing an
agreement for rehabilitation of Inga I and II with SNEL
(National Electric Company) and the Ministry of Energy in
exchange for dedicated lines to their potential metal plants
in Pointe Noire. Ambassador Herman Cohen, acting as a
consultant to Reynolds Group, indicated to econoff that
Reynolds and MagAlloy will commence negotiations on Nov 22 to
work out a joint approach to SNEL. The are willing to
rehabilitate eight turbines at Inga but need to negotiate a
long-term electricity price to make the project viable.
MagAlloy will need 175 MW and Reynolds will need 500 MW.


4. (SBU) MagAlloy recently issued a press release stating
that it has signed a preliminary agreement with SNEL
(National Electric Company). Reynolds and MagAlloy have also
taken on SNC-Lavalin (a Canadian electric engineering firm),
Eskom (RSA),Fluor Daniels, Trans Africa Projects (RSA) and
the IDC as partners. Ambassador Cohen indicated that the
group hopes to have an agreement with SNEL by the end of

2004. (Note: Any deal would have to be approved by the EcoFin
and the President. Furthermore, the Minstry of Energy is
planning an international conference on Inga Dam for December
2004 where it will consider various proposals for Inga I and
Inga II rehabilitation. End note.)


5. (C) Comment: Eskom and SNC-Lavalin are well positioned to
have their proposal approved to develop the Inga Dam system.
They have strong support in the Presidency and will likely
try to hinder the entry of other energy firms. Reynolds and
MagAlloy are in a more difficult position and it may well be
necessary for them eventually to include Eskom and
SNC-Lavalin as partners in order to have their proposals
favorably considered. End comment.
MEECE