FURTHER ON MOROCCO'S NUCLEAR ENERGY PLANS

C O N F I D E N T I A L RABAT 001643

SIPDIS

SIPDIS

DEPT FOR NEA/MAG AND EB/ESC
USDOC FOR ITA/MAC DAVID ROTH AND AARON BRICKMAN
USDOE FOR GINA ERICKSON AND YOUNES MASIKY
STATE PASS USAID FOR CYNTHIA JUDGE

E.O. 12958: DECL: 08/25/2015
TAGS: ENRG ECON SENV MO
SUBJECT: FURTHER ON MOROCCO'S NUCLEAR ENERGY PLANS

REF: A. RABAT 732

B. RABAT 151

Classified By: Economic Counselor Stuart Smith, Reasons 1.4 (b and d).


1. (C) Summary: Economic and Commercial Counselors called on
National Electricity Office (ONE) Chairman Younes Maamur on
August 18 in Casablanca to learn more about ONE's plans to
develop nuclear energy to help meet Morocco's burgeoning
demand for electricity, a program in which he had earlier
told the Ambassador he hoped to see American companies
participate. With demand rising by 8-9 percent per year,
Maamur said the country needs to add 500-600 MW in production
facilities annually. While he anticipates that coal, gas,
wind and hydro projects will meet the demand in coming years,
Maamur said ONE envisions presenting a plan to GOM
policymakers for construction of a 1000 MW nuclear power
plant that could come on line in 2014/15. ONE has been in
contact with Korean, Russian, French and British officials,
and would like to add the U.S. to the mix as well. The
company wants to test the market on a nonbinding basis, he
explained, and will invite 3-4 suppliers to assess the
economic and technical feasibility of its plans. Maamur
expressed hope that Westinghouse would be among those who
participate in the process. In the meeting, Maamur also
outlined his concern with the "unbalanced" Moroccan-Algerian
energy relationship, suggesting Moroccan electrical support
for its neighbor may not continue forever. End Summary.

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Rising Demand
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2. (SBU) Maamur briefly reviewed the ground he covered in his
earlier meeting with the Ambassador in April (ref A),
stressing the "good problem" the company faces of steady
growth in demand-- 8 percent over the last three years, 8.7
percent this year, and a base case for the future of 9
percent. The challenge is on the production side to
equilibrate supply and demand, he said, as chronic delays in
bringing new production facilities online leave Morocco on
the verge of facing a load-sharing situation. His priority,
he stressed, is to avoid such a bottleneck, while also
seeking to make energy available at the lowest possible
price. (Note: A newly approved rate increase was headlined
ONE's "summer gift" in local papers last week, and the
politically sensitive issue will become even more so as next
year's parliamentary elections approach. End Note.)


3. (SBU) Increasing demand, Maamur said, requires that
Morocco bring on-line 500-600 MW per year in new capacity,
necessitating investment of $1.2 to $1.5 billion per year.
Maamur judged that it is not the best use of public resources
for ONE or the GOM to shoulder this bill. Rather national
policy is to mobilize private investment in power production
to meet demand, and focus government resources on upgrading
the country's transmission grid and in further rural
electrification. Regarding upcoming projects, Maamur said
ONE will soon launch an IPP for a 1200 MW coal fired plant in
Agadir. It had planned to bring an 800 MW natural gas fired
plant on line in 2008, but supply difficulties with Algeria
have held up that plan. Hence, ONE is devoting increasing
attention to other potential energy sources to diversify its
sources of supply. These include a liquified natural gas
port project on the Atlantic coast, renewable energy
sources-- principally wind and hydro-power, and nuclear power.

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The Nuclear Option
--------------


4. (SBU) Maamur noted that Morocco has had preliminary
discussions about its nuclear plans with the International
Energy Agency (IEA),to update its technical alternatives
(competing Russian, Canadian, and European/American designs)
and to identify a potential site for the plant on the coast
near Safi. In addition to the U.S., it has also discussed
the issue with diplomatic representatives from Russia, Korea,
Britain and France. ONE's goal is to develop a proposal for
a 1000 MW nuclear plant that could come into service in 2014
or 2015. To that end, Maamur is preparing an information
memo for "the Westinghouses of the world" to ask them on a
"non-binding basis" what sort of project they could propose
for Morocco. He characterized it as something between a
"prequalification and a proposal," and said it will be used
to "test the market and update Morocco's technical options
from the source." Stressing that ONE had not yet finalized a
list, he asked for Mission and USG assistance in contacting
Westinghouse and/or other suppliers who might be interested
in responding to such an appeal. He also expressed interest
in U.S. assistance in identifying other issues surrounding
nuclear power, including environmental and other
considerations.


5. (SBU) Maamur said that with this updated technical
dossier, ONE would then approach GOM decisionmakers for their
"political approval" of pursuing a nuclear energy option. In
the meantime, it also hoped to work with the U.S. and others
to ensure that the range of issues surrounding nuclear power
(from environment to safety, etc.) were thoroughly covered.

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Issues with Algeria
--------------


6. (C) In addressing his supply challenges, Maamur elaborated
on his frustrations with Algeria, arguing that the overall
energy relationship is very unbalanced. Morocco supplies
important assistance by providing 100 MW daily to help
Algeria meet its peak demand. That supply, he noted, also
plays an important role in helping stabilize the Algerian
grid (just as Morocco's interconnection with Spain stabilizes
Morocco's system). Notwithstanding this fact, Morocco has
not received the 1 billion cm in gas to which it is entitled
as a transit fee for Algeria's gas pipeline to Spain, forcing
postponement of the planned gas plant. Maamur noted that he
recently went to Algeria to seek a more equitable
arrangement. His readout of the visit was mixed: while he
believes the Algerian Minister, with whom he worked at the
World Bank, understands that the current dynamic cannot last
forever and is ready to find a solution, he is not sure how
quickly this can occur given the "inertia" in the Algerian
system. His scepticism, he added, stems too from the fact
that while Algeria has demurred on meeting its obligation by
saying that all its gas is pledged, it also offered a power
plant on the Moroccan-Algerian border to provide energy,
clearly indicating this was not the case. His goal now, he
explained, is to contractualize all exchanges with Algeria,
and then take a hard look at them. "I am looking to preserve
our interests," he said, stressing that if change comes, it
would not be for political reasons, but for prudent
management of Morocco's resources.


7. (SBU) Comment: As related reftels, Maamur is an articulate
and poised technocrat, who appears determined to shake up
Morocco's electricity monopoly and instill a less statist
culture. FCS is working to contact Westinghouse and other
companies that may be interested in taking part in ONE's
plans. End Comment.
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RILEY