Identifier
Created
Classification
Origin
04SANTODOMINGO502
2004-01-28 12:20:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Santo Domingo
Cable title:  

Electricity Sector Shutting Down in the Dominican

Tags:  EFIN PREL ENRG DR 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SANTO DOMINGO 000502 

SIPDIS

STATE FOR WHA AND EB
TREASURY FOR OASIS: J.TAYLOR, N.LEE, R.TOLOUI AND L.LAMONICA
NSC for H. Cruz

SENSITIVE

E.O. 12958: N/A
TAGS: EFIN PREL ENRG DR
SUBJECT: Electricity Sector Shutting Down in the Dominican
Republic


UNCLAS SANTO DOMINGO 000502

SIPDIS

STATE FOR WHA AND EB
TREASURY FOR OASIS: J.TAYLOR, N.LEE, R.TOLOUI AND L.LAMONICA
NSC for H. Cruz

SENSITIVE

E.O. 12958: N/A
TAGS: EFIN PREL ENRG DR
SUBJECT: Electricity Sector Shutting Down in the Dominican
Republic



1. (SBU) Summary: As more power plants shut down, GODR and
energy sector representatives in public recriminations.
Negotiators are close to an agreement that would put
Cogentrix back on line. End summary.


2. (SBU) Nine representatives of the electricity sector
briefed the Ambassador on January 23 on the meetings they
had last week in Washington with State, Treasury, NSC, IMF,
IBD and WB. They described the system as "close to
bankruptcy." Representatives of the generating companies
described one by one the date that each generating plant
will be shut down for lack of fuel. The sector estimates
that by the end of January, the country will be back to
generating about half of the daily peak demand.


3. (SBU) Company representatives assert that approximately
$200 million is needed immediately to buy fuel and avert
bankruptcy of at least two of the companies. However, if
the cash is not accompanied by actions on tariffs and
subsidies, the system cannot recover because even with the
new rates that took effect January 1, the wholesale price of
electricity is below the retail cost -- and the GODR
continues to accumulate arrears on subsidy payments. The
pricing gap has been growing daily as the value of the peso
continues to decline.


4. (SBU) Technical Secretary of the Presidency Carlos
Despradel himself considers it impossible for the GODR to
seek to subsidize energy, particularly as the peso devalues.
"We should tell people we have to pass along the full price,
just the way we do with gasoline." He acknowledged,
however, that decisions on these matters are not his
responsibility and beyond his ability to influence.


5. (SBU) In the meantime, Secretary of Finance Calderon
appeared on television January 25 and in local papers
accusing the generators of extortion and blaming them for
the blackouts. He rebuffed recommendations the sector had
presented to the GODR and denied that the GODR owed even
"one penny" to Virginia-based AES, which is the largest
investor in the sector. He said if the companies are
bankrupt, "why not declare it?"

COGENTRIX
--------------


6. (SBU) Since the Dominican Republic has been in a
perpetual electricity crisis, it would be tempting to
believe that as they have done so many times before,
government officials will pull a rabbit out of the hat and
keep the system going. The rabbit might be a deal with
Goldman Sachs, new owners of COGENTRIX, which is currently
in negotiations with the government concerning approximately
$35 million in arrears. COGENTRIX has full fuel tanks, so a
settlement could put 300 MW on line quickly. Despradel told
emboffs on January 23 it appeared that Goldman Sachs would
reduce the amount required to $24 million if $12 million
were paid promptly. Cogentrix sources have since confirmed
agreement on a $16 million payment, but with a firm demand
for cash by January 29, or company lenders will call the
Inter-American Development Bank guarantees.

--------------
Comment
--------------


7. (SBU) Failing a COGENTRIX deal, we would expect
increasing long blackouts during the next two weeks
and cannot entirely rule out the possibility of a system
shut down. This means the country will again be living with
prolonged blackouts that will intensify as the country
braces for a national strike, enhancing public discontent
and the possibility for vigorous protest.
HERTELL