Identifier
Created
Classification
Origin
05ATHENS2031
2005-07-29 14:10:00
UNCLASSIFIED
Embassy Athens
Cable title:  

AMBASSADOR DISCUSSES ISSUES REGARDING CINERGY'S

Tags:  BEXP ECON EINV AMB 
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UNCLAS SECTION 01 OF 02 ATHENS 002031 

SIPDIS

E.O. 12958: N/A
TAGS: BEXP ECON EINV AMB
SUBJECT: AMBASSADOR DISCUSSES ISSUES REGARDING CINERGY'S
NATURAL GAS INVESTMENT IN GREECE WITH MINISTER OF
DEVELOPMENT

UNCLAS SECTION 01 OF 02 ATHENS 002031

SIPDIS

E.O. 12958: N/A
TAGS: BEXP ECON EINV AMB
SUBJECT: AMBASSADOR DISCUSSES ISSUES REGARDING CINERGY'S
NATURAL GAS INVESTMENT IN GREECE WITH MINISTER OF
DEVELOPMENT


1. (U) Ambassador called on Minister of Development Sioufas
to discuss difficulties being experienced by U.S. company
Cinergy in the development of the natural gas market in the
Attica peninsula of Greece (including Athens). Cinergy,
together with Shell and the Greek natural gas company DEPA,
formed EPA Attiki (EPA),a company to provide natural gas to
the Attica peninsula. Cinergy, through EPA, has alleged that
a subcontracting company, EKOFA, has failed in its obligation
to promote natural gas to consumers and provide a fixed
number of new hook-ups, causing EPA to lose a substantial
amount of money. Cinergy local representative, Gerasimos
Contomichalos, approached Ambassador about the problems, and
asked for Embassy assistance.


2. (U) Ambassador began the meeting by noting that his number
one priority was to promote U.S. investment in Greece, and to
make sure that existing investments went as smoothly as
possible, as current investors were the best spokesmen for
potential investors. The Ambassador then quickly outlined
Cinergy,s position for Sioufas, who was well-versed on the
issue. Sioufas observed that last year's change in
government from PASOK to ND had been a positive experience
for all foreign investors in Greece, and that he and his
ministry had been personally involved in settling other
concerns raised by U.S. investors in previous disputes; he
and the Ministry support U.S. investment in Greece.


3. (SBU) On the matter at hand, Sioufas claimed that Cinergy
was not receiving accurate information from its local
representative. Instead, he noted that EPA had never raised
any concerns regarding EKOFA from 2002 to 2004. Only when
the government changed in March 2004 did EPA complain about
EKOFA,s performance. Sioufas claimed that as a result of
EPA,s first complaints, Hellenic Petroleum and the Ministry
changed EKOFA,s board of directors, installing a more
dynamic chairman, and that as a result EKOFA was beginning to
meet its marketing obligations.


4. (SBU) Sioufas noted that EKOFA had been instructed to
provide first priority on hook-ups to hospitals and schools.
He also said that EPA chairman, Andreas Papandreou, resigned
in May. (Note: Andreas is the brother of PASOK party leader
Giorgos Papandreou.) As a result DEPA appointed the current

chairman, Theodoros Behrakis. Sioufas alleged that EPA has
also failed in its contractual obligations, and that as a
result of poor management and its own failures, has resorted
to casting blame on EKOFA to protect itself. As an example
of EPA,s operational problems he noted that when he tried to
make the Ministry of Development building a flagship for
converting other government buildings to natural gas, EPA
claimed it would take 3-4 months to run the spur line from
the gas main; a distance of some 15 feet. This type of
performance, coupled with poor management, were EPA,s true
problems.


5. (SBU) Sioufas also stated that the GoG has been supporting
the EPA natural gas project, providing 60 million euros worth
of European Union Structural Adjustment funds and starting an
advertising campaign. He observed that he has sent two of
his closest associates, Mr. Papagiannis and Ms. Kostopoulou,
to EPA to resolve this problem. He could not understand how
EPA could remain quiet for two years, then suddenly after the
change of government, come up with a legal demand for 200
million euros in compensation for damages suffered. He noted
that the total value of the capital investment in the project
for Shell and Cinergy was no more than 177 million euro.
Ambassador pointed out that, whatever the lawyers first
claimed, Cinergy was now seeking only nine million euros in
compensation from EKOFA and dissolution of the marketing
partnership.


6. (SBU) Ambassador told Sioufas that he was here to get the
GoG,s version of events, and to help resolve the problem.
He further assured the Minister that he took the issue
seriously, as Cinergy was one of the flagship US investments
in Greece. Sioufas, in turn, assured Ambassador that he had
instructed his people to find a mutually acceptable
resolution for all parties, and that his Secretary General
Nikos Stefanou was at Cinergy,s or Ambassador,s disposal
for further work on this topic. He closed by suggesting that
Cinergy find a neutral third-party auditor to investigate
EPA,s management and then make its own conclusion about the
true state of affairs. He noted that the natural gas project
had been a successful investment, and would in time and with
higher oil prices, become a profitable venture, especially in
the event of a change of management at EPA. The Minister also
repeatedly noted the good intentions and the pro-American
feelings of the heads of the two state companies involved in
the issue Christodoulou of Hellenic Petroleum and Moisis of
DEPA.


7. (SBU) Comment: There has been little effective marketing
for natural gas in the Attica region thus far, which is the
essence of Cinergy,s complaint. On the other hand, thus far
we don,t see a government or EKO (Hellenic Petroleum) effort
underway to push Cinergy or Shell out of the sector, just the
normal clash of companies seeking explanations when the
operational results are disappointing. Embassy will continue
to help Cinergy work out its problems with its state-owned
supplier and marketing agent. End Comment.
OLESEN