ELECTRICITY (IS) NOT STATIC

UNCLAS RABAT 000732

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/ESC AND NEA/MAG
USDOE FOR GINA ERICKSON AND YOUNES MASIKY
USDOE ALSO FOR NNSA
UNVIE FOR IAEA
USDOC FOR ITA/MAC NATE MASON AND ITA/BI AARON BRINKMAN
USDOC PLEASE PASS TO USTDA

E.O. 12958: N/A
TAGS: ENRG ETTC ECON SENV KNNP MO
SUBJECT: ELECTRICITY (IS) NOT STATIC

REF: A. RABAT 151

B. 05 RABAT 2311

C. 05 RABAT 1636

(U) This message is Sensitive but Unclassified, please
protect accordingly.


1. (U) SUMMARY: Director of Moroccan state electricity
company Younes Maamar described to Ambassador on April 18 the
government's plans to deregulate the electricity sector,
stressing the GOM's urgency to diversify its energy sources
and his personal preference that Morocco move forward with
nuclear power. Maamar estimated the sector will need $5
billion in private investment over the next five years to
satisfy electricity demand. Ambassador announced the
approval of an $820,000 grant from the U.S. Trade and
Development Agency (USTDA),with which Maamar was very
pleased. END SUMMARY.

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"Energy Hungry"
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2. (U) Newly-appointed National Electricity Office (ONE)
director Younes Maamar described the power sector as the most
"critical piece" in the country's quest for lasting economic
development. Calling Morocco an "energy hungry country,"
Maamar said the state alone cannot provide the capital
investment the sector needs to keep up with demand - growing
an average of eight percent over the past several years - and
said if private investment is not found the sector will
become a bottleneck on economic progress. Maamar's goal as
ONE director is to guide the organization through a
restructuring process that will open the sector to private
firms and bring in the estimated $5 billion the sector will
need over the next five years to keep up with demand.
Ambassador agreed the state cannot provide this kind of
capital and reiterated the importance of maintaining an
appropriate balance of cost and supply of electricity to a
developing economy like Morocco.


3. (U) Maamar said that while liberalization is needed, the
GOM will be careful to maintain adequate regulation.
Ambassador agreed, describing the problems faced in
California after an excessive deregulation left the sector in
shambles, to which Maamar spontaneously blurted "AES (his
former employer) should have taken out political risk
insurance in California!" citing the heavy losses the company
suffered there. Maamar acknowledged that relying entirely on
market forces in the power sector is not possible, and said
power plants must be allowed to sign long-term guaranteed
purchasing agreements.

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Wind Power
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4. (U) Ambassador noted that the astronomical growth of
demand for electricity in Morocco and current high
international prices of fossil fuels make diversification of
energy sources and the development of renewable energy
crucial for Morocco. Maamar said the country has some of the
best wind energy potential in the world (Ref B),and that ONE
will soon issue a request for proposals to develop a 50
megawatt windfarm in the north of the country on a
Build-Operate-Transfer basis. He said Morocco will resist
the temptation to develop wind energy through tax incentives
as was done in the United States, but will instead rely on
incentives to capital investment or debt concessions (where a
portion of the commercial operator's debt is subsidized by
the state),as was done in Europe. The GOM will also
continue to sign guaranteed purchase contracts to mitigate
the risk associated with high capital start up costs for the
wind sector.

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Going Nuclear?
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5. (U) Maamar noted the GOM is looking into nuclear power as
part of its drive to diversify its energy sources, and said
while no decision has been made, he personally strongly
supports the idea. He said the GOM is working with the IAEA
on feasibility studies and he would like GOM officials to
visit the United States to learn from its experience with
nuclear power. Maamar took pains to emphasize that should
the country pursue a nuclear program, it would do so within a
legal/regulatory framework that the United States and other
allies are comfortable with. Maamar made clear his desire
for "help from our American friends" in developing nuclear
capability. Ambassador said he had recently visited the
Center for Energy, Science and Nuclear Techniques (CNESTEN),
where U.S. firm General Atomics is completing a small
research reactor (Ref C),and was very impressed with the
agency's activities.

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USTDA Grant
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6. (U) Ambassador informed Maamar of the official approval of
a USTDA grant of $820,000 to provide technical assistance for
ONE's proposed reorganization. Maamar was pleased with the
grant announcement and said he had very favorable experiences
working with USTDA in previous jobs.

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Office National de l'Electricite
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7. (U) The National Electricity Office is Morocco's
state-owned electricity transporter/distributor and has
nearly 9,000 employees. ONE is not a policy-making body; the
Ministry of Energy sets policy and ONE carries it out. The
organization will undergo a dramatic restructuring next year
through a reform bill to be presented to parliament this year
(Ref A) that will liberalize the sector and correct what
Maamar called the "schizophrenic situation" of ONE being both
a regulator and a competitor in the electricity market.


8. (SBU) Maamar said he hopes the liberalization will "open
the sector to the Anglo-Saxon world" and its important
experience with energy policy. Noting that the next ONE
Request for Proposals will come out in English, "the language
of business," Maamar said "while Mr. Chirac has the
prerogative to protect his language, I have the prerogative
to bring investment to my sector."


9. (SBU) BIO NOTE: Maamar worked for the World Bank's
International Finance Corporation for six years in
Washington, and then for the Arlington-based AES Corporation
at the company's London officQ He looks to be in his
mid-40's and speaks perfect English. Maamar's wife is
American, daughter of a former U.S. ambassador. Maamar is a
reformer with a modern, private sector outlook. Clearly more
comfortable with the American style of doing business than
the French model, at one point in the conversation Maamar
said he considers himself "almost American."

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Riley