REGIONAL ELECTRICITY: AES EXPLORES PARTNERSHIP

C O N F I D E N T I A L ALMATY 001489

SIPDIS

SIPDIS

DEPT FOR SCA/CEN
TDA FOR SCOTT GREENIP AND DAN STEIN

E.O. 12958: DECL: 04/23/2015
TAGS: ENRG EPET KZ PGOV PREL TI AF
SUBJECT: REGIONAL ELECTRICITY: AES EXPLORES PARTNERSHIP
WITH STATE OIL-AND-GAS SUBSIDIARY

REF: A. DUSHANBE 711


B. DUSHANBE 489

C. DUSHANBE 493

Classified By: Amb. John Ordway, reasons 1.4 (B) and (D).


1. (C) Summary: AES Country Manager Dale Perry told Econoff
on April 17 that AES was near to signing an MOU with
"KMG-Energy," a newly-created subsidiary of Kazakhstan's
state-owned oil-and-gas company, KazMunaiGaz (KMG),to
cooperate in the construction and operation of regional
electricity transmission lines. Discussions were moving
quickly, Perry observed, and an MOU could potentially be
signed before the end of April. On the topic of electrical
generation, Perry all but conceded that AES would not be
granted a role in either the Sangtuda 1 or Rogun hydro
projects in Tajikistan. End Summary.


2. (C) On April 3 Perry informed Ambassador Ordway that
representatives of a new KMG subsidiary, "KMG Energy," had
recently approached Perry, asking to be included in two AES
initiatives -- the construction of a new thermal power plant
in Ekibastuz (jointly with the Chinese),and the construction
and operation of Central-South Asian transmission lines.
Perry described "KMG Energy" as a recent creation of
presidential son-in-law Timur Kulibayev, with a few existing
power assets -- including the Zhamboul and APC generating
stations -- and ambitions to acquire more.


3. (C) On April 17, Perry told Econoff that talks with KMG
Energy had progressed to the point where the two companies
were in fundamental agreement on an MOU calling for
cooperation in the construction and operation of regional
transmission lines. Perry added that he thought the MOU
could by the last week of April, in time to justify inviting
KMG Energy to a broader meeting of project actors in
Islamabad May 8-9.


4. (C) Perry spoke pessimistically of AES's prospects for
joining Tajikistan's Sangtuda 1 and Rogun projects.
Regarding Sangtuda 1, he commented that RAO UES had already
purchased four of six turbines, which likely precluded World
Bank financing of the project. RAO UES Chairman Anatoliy
Chubais had recently been in Dushanbe, he added, and
reportedly had announced that RAO UES had "all the money we
need" to fund the project. That, Perry said, added to the
Kremlin's clear opposition to U.S. involvement in the
project, seemed to preclude AES participation. Perry also
remarked that "AES is no longer seeking a share" of the Ragon
1 project." Instead, he said, AES was interested in the
joint development of new hydro projects, on the order of
300-1000 MW.


5. (C) Comment: We do not know much about "KMG Energy," as
it is too new to have left many traces. Kulibayev's backing,
however, suggests that the company will have enough political
influence to help AES overcome any potential problems which
might arise in its transmission projects. It is worth noting
as well that KMG will soon be subsumed under Samruk, the new
state holding company. One of the GOK's goals in creating
Samruk is to prepare companies for total or partial IPOs.
Thus, the creation of "KMG Energy" may indicate the GOK's
intention to take it partially or completely public at some
point. If that were to occur, association with AES would be a
major plus. End Comment.
ORDWAY