EGYPT: MINISTER OF ELECTRICITY ON NUCLEAR, CUTTING

C O N F I D E N T I A L SECTION 01 OF 03 CAIRO 006748

SIPDIS

SIPDIS

STATE FOR NEA/ELA, ISN/NESS
NSC FOR R. WATERS
LONDON FOR TSOU
PARIS FOR WALLER

E.O. 12958: DECL: 11/06/2016
TAGS: ENRG PGOV TRGY KNNP IAEA EG
SUBJECT: EGYPT: MINISTER OF ELECTRICITY ON NUCLEAR, CUTTING
SUBSIDIES

REF: CAIRO 06038

Classified by Ambassador Francis J. Ricciardone for reasons
1.4 (b) and (d).

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Summary
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1. (SBU) Minister of Electricity and Energy (MOE) Hassan
Younes reported on November 2 that the GOE has not yet
finally decided to pursue nuclear power development, but may
do so following the presentation of an economic analysis to a
PM-chaired Supreme Council on Energy meeting on November 7.
The GOE will send two officials to the December 4-6 IAEA
nuclear power workshop. In the face of soaring demand,
Younes is moving aggressively toward free market price
reforms as the only effective means to drive down
consumption. He has cut power to the most high-visibility
and influential governorate departments who are delinquent in
paying their bills. He reported that infrastructure limits
Egypt to providing more than 17 MW of emergency power to
Gaza, but the seven member countries of the regional
electricity grid will take up the issue of adding the PA at
their next meeting. End summary.

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Decision Not Finalized
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2. (SBU) Minister Younes told the Ambassador November 2 that
the GOE has not yet finally decided to pursue civilian
nuclear power development, but is instead completing its
economic analysis of the feasibility of nuclear versus other
alternative means of power generation. The minister said the
study would likely be presented on November 7 to the
cabinet-level interagency Supreme Council on Energy, chaired
by the Prime Minister, which would then debate the GOE's
course of action. (Press reports assert that the minister,
who will present the study to the Council, will advocate for
the nuclear development option, he has not yet set the
ministry's policy. He did not signal his position to us on
November 2. The Ambassador will meet PM Nazif on November 13
and the DCM will meet with Egyptian Atomic Energy Authority
head Dr. Aly Islam on November 14 to discuss developments.)


3. (SBU) Should the GOE decide to pursue the nuclear option,
Younes said the scale of the project, including the size of
the proposed plants, will require thorough review.
Previously, Egypt planned a 1,000 MW plant located on the
Mediterranean coast outside Alexandria, but Younes said grid
issues and consumption forecasts would need to be reexamined
in order to assess how many and what size plants would be
needed. Regarding reactor design, Younes noted how he has
been impressed with the containment technology and safeguards
built into American plants, which far exceeded those found in
the older Russian models.

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December IAEA Workshop
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4. (SBU) Minister Younes said that the GOE will send two
officials from the Nuclear Power Plants Authority to the
December 4-6 IAEA "Issues for the Introduction of Nuclear
Power" workshop in Vienna. (We understand from another
source that Nuclear Power Plants Authority Chief Dr. Yassin
Ibrahim will lead the delegation.)

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Driving Market Price Reforms for Conservation
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5. (C) The Ambassador queried the minister on potential
conservation measures in the face of Egypt's economic and

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population growth. Electricity consumption growth in Egypt
last year surged to 10.2 percent, outstripping GOE
predictions of 7 percent. Acknowledging that subsidized
energy dissuades conservation, Minister Younes stated that he
"has given up" on the public awareness campaigns encouraging
people to switch off the lights. Instead, Younes said he
believes that market pricing will drive conservation, and
that his ministry aims to increase prices to fully recover
costs of production, transmission, and distribution within
four years.


6. (SBU) The Minister sketched practical steps taken already
taken toward that goal: the ministry, through the local
distribution companies, has embarked on a series of "quiet"
price increases to consumers. While the price hikes will not
affect those, generally among the poor, who use less than
five kilowatt hours (KWH) per month, other domestic consumers
will see increases of between 5 and 8 percent on their
November bills. Commercial users will see increases of
approximately 7 percent. While these increases have largely
escaped press attention, recent reports quoted the president
of the electrical distribution holding company as indicating
revenues would need to be increased to meet rising demand
brought on by increased consumption. The present daily load
in Egypt is 18,000 MW; installed capacity is 21,000 MW.
Current, and conservative, MOE predictions estimate that by
2027, Egypt will consume 54,000 MW daily, thereby requiring
an installed capacity of 63,000 MW.

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Pay your Bills, or Else
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7. (SBU) Minister Younes is also in the center of a battle
between the MOE and other government departments over their
delinquent payment of electricity bills. According to press
reports he has the PM's support to cut off electricity to
government departments who do not pay their bills. Younes
confirmed that after repeated warnings, the power
distribution company had indeed cut off some Cairo
Governorate buildings, successfully taking on even the
powerful Governor of Cairo. The cutoffs prompted a
revelation among some governorate department heads as to the
true price of their consumption. MOE has also reportedly
sent warnings even to the Ministry of Interior (LE 3.85
million, or USD 675,000 in arrears),Ministry of Higher
Education (LE 500,000, or USD 87,000),and Cairo University
(LE 6 million, or USD 1.05 million). Some reports indicate
this tactic may be catching on: some local water authorities
have issued similar warnings to delinquent customers.

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Gaza Electricity Update
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8. (C) Younes confirmed the Gaza power transmission picture,
on which MOE First Undersecretary Hamed Emmara provided us
greater detail: Egypt is providing 15 Megawatts of emergency
electricity supply to Gaza through medium tension wires
exiting Egypt at the Rafah terminal. Gaza needs 75 MW, but a
lack of infrastructure, i.e. high-tension wires, prevents
Egypt from transmitting more. Egypt has provided the PA with
new transformers to increase their transmission capabilities,
and MOE hopes that the Palestinians will have the Gaza power
plant up and running at a higher capacity soon. Separately,
MFA contacts have told us that the seven participant
countries in the regional electrical grid will take up the
issue of PA membership at their next meeting (date TBD).

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Embassy Interagency Nuclear Energy Working Group
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9. (SBU) Post has formed a Nuclear Energy Development Working
Group (NEDWG) to coordinate reporting, analysis, and

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commercial advocacy related to Egypt's nuclear power
ambitions. The working group, chaired by Econ Counselor
Catherine Hill-Herndon, includes representatives from
Econ-Political, ESTH, DAO, ORA and FCS. Post looks forward
to further liaison with State, DOE, and other Washington
agencies on this issue. NEDWG coordinator is Economic
Officer Kevin Roland, 20-2-797-3952, rolandks2@state.gov,
rolandks@state.sgov.gov.

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Comment
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10. (C) Minister Younes downplayed the hoopla surrounding
President Mubarak's statements at the NDP conference and
disparaged the subsequent, overly enthusiastic media
coverage. Eventual readouts of President Mubarak's trips to
Russia and China should reveal what offers they may have put
on the table. Separately, Younes' hard-ball tactics with
governorates over unpaid bills evidence continued seriousness
of purpose on the part of PM Nazif's cabinet regarding
economic reforms.
RICCIARDONE