PSEG TO SELL OMAN UTILITY INVESTMENT

UNCLAS MUSCAT 000989

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STATE FOR NEA/ARP, EB/CBA, EB/ESC/IEC/ENR
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E.O. 12958: N/A
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SUBJECT: PSEG TO SELL OMAN UTILITY INVESTMENT


1. (U) Contains business proprietary information - please
protect.


2. (SBU) On June 17, PSEG officials Nelson Garcia, Vice
President, Generation and Technical Services, and Hal Sunar,
Business Director, Development and Management, informed
Econoff that the company would be divesting itself from
Salalah Port Holdings, the holding company for Dhofar Power
Company. U.S.-based PSEG led a consortium in March 2001 in
creating Dhofar Power, which began producing power through
its 240 megawatt generation facility in May 2003. Under a
20-year contract with the government, Dhofar Power manages
and operates the entire Salalah power grid, generating and
distributing electricity to approximately 40,000 customers.


3. (SBU) Garcia explained that the decision is part of
broader campaign to divest the New Jersey company from its
international operations as a result of merger talks with
Chicago-based Exelon. Exelon, which will become the largest
nuclear power producer in the U.S. once the merger is
complete, has indicated that it will focus exclusively on its
domestic nuclear operations. As a result, PSEG has already
sold its investments in Tunisia, China, and Poland, and
intends to unload its stake in Chilean, Italian, and Peruvian
power companies.


4. (SBU) PSEG has received a competitive offer for its 46%
stake in the company from the "Oman Technical Partners
Consortium," led by the al-Maashani family's Muscat Overseas
Group. (Note: The al-Maashanis are related to Sultan Qaboos
on the maternal line, and are one of the southern Dhofar
region's most prominent tribes. End note.) The consortium
includes Malaysian independent power producer Malakoff and
Finnish firm Fortum. PSEG expects the deal to be completed
by the end of July.
GRAPPO