ABU MAZEN'S OFFICE BUYS TRANSFORMERS FROM EGYPT

C O N F I D E N T I A L JERUSALEM 003555 SIPDIS SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WATERS/MAHER/WAECHTER; NSC FOR ABRAMS/DORAN; TREASURY FOR NUGENT/ADKINS E.O. 12958: DECL: 06/09/2016 TAGS: ENRG EFIN EAID KWBG IS SUBJECT: ABU MAZEN'S OFFICE BUYS TRANSFORMERS FROM EGYPT FOR GAZA REF: JERUSALEM 2748 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d). ¶1. (C) PA President Abbas' office authorized the purchase August 3 of seven power transformers from Egypt with USD 1.8 million provided by the Arab League to the Egyptian Electric Company, according to the UN Special Coordinator's Office (UNSCO) and press reports. These transformers are to replace those destroyed in the June 28 Israeli air strike against the six transformers at the Gaza power plant (reftel). (Note: The Gaza Power Generating Company (GPGC),the private company that owns the Gaza Power Plant, owned four of the transformers and the Palestinian Energy Authority (PEA),a PA agency, owned the other two. Prior to June 28, the Gaza Power Plant provided 43 percent of electricity consumed in Gaza, with the remaining 57 percent imported from the Israel Electric Company. End note.) ¶2. (C) An additional USD 2.6 million must still be raised to cover transportation costs from Egypt and installation of the transformers. According to Swedish Consul Annika Johansson, the Swedish government has expressed its willingness to fund this project and is discussing the matter with the Office of the PA President. However, Johansson told EconOff that the Swedish government remains concerned about the volatile security situation in Gaza and the threat it may pose to this project. ¶3. (C) According to UNSCO, once transportation and installation funds are secured, the Palestinian Energy Authority (PEA) estimated that the Gaza power plant could be up and running within one month. Walid Salman, the Executive Managing Director of the GPGC, told EconChief that this temporary solution would allow the Gaza Power Plant to produce 50 MW of electricity. At a later date, permanent replacement transformers would have to be purchased to allow the Gaza Power Plant to operate closer to its full capacity of 110 MW. (Note: Permanent replacement transformers are not currently available on the market and would need to be manufactured. In 2004, OPIC provided political risk insurance to Morganti Development, the U.S. investor that owns a 33 percent share in the Gaza Power Plant. We understand Morganti is still completing its claim. End note.) WALLES