HONDURAS: DIPPSA SALE MAY GO TO TRAFIGURA, BUT

C O N F I D E N T I A L SECTION 01 OF 03 TEGUCIGALPA 001238 SIPDIS SIPDIS STATE FOR EB/ESC, WHA/EPSC, WHA/PPC, AND WHA/CEN STATE FOR D, E, P, AND WHA TREASURY FOR DDOUGLASS STATE PASS AID FOR LAC/CAM NSC FOR DAN FISK E.O. 12958: DECL: 07/11/2016 TAGS: EPET ENRG PGOV PREL PINR HO SUBJECT: HONDURAS: DIPPSA SALE MAY GO TO TRAFIGURA, BUT PDVSA CONNECTION REMAINS REF: TEGUCIGALPA 1101 AND PREVIOUS Classified By: Ambassador Charles A. Ford for Reasons 1.4 (b) and (d). ¶1. (C) Summary: The draft Terms of Reference (TOR) for the national bid were reportedly sent by bid consultant Robert Meyeringh to the GOH for review June 29. Ambassador has called for an appropriate and CAFTA-consistent review and comment period of the TOR once they are formally released (expected by July 14). Meanwhile, the owner of Honduran retailer DIPPSA has now indicated that at least a partial sale of the company is imminent. He indicated he has an "MOU" with Dutch oil trading company Trafigura Beheer B.V. for a 50 percent purchase of DIPPSA. (Note: Trafigura is a company accused of violating oil sanctions on Iraq under the U.N. Food for Oil program, and has historical connections to both bid consultant Robert Meyeringh and the Government of Venezuela. END note.) Venezuelan state energy company PDVSA remains a possible suitor, and a network of PDVSA (or PUMA, a Trafigura affiliate) gasoline stations and storage networks would set either company up to be a prime candidate to win the upcoming national bid for Honduras, fuel supply. END SUMMARY. ¶2. (C) At a June 29 press conference, U.S. citizen consultant Robert Meyeringh described in general terms but did not publicly release the Terms of Reference (TOR) for the upcoming national bid. The consultant has reportedly sent a copy of the draft document to the GOH for a legal review period of at least fifteen days. EconChief quickly contacted Presidential Ministers Yani Rosenthal and Enrique Flores Lanza to request a public comment period for the TORs following publication, pursuant to Chapter 9 of the CAFTA treaty (on public bids). (Note: Post's reading of the treaty suggests that potential bidders have a minimum of ten days to submit comments or questions, and can expect written responses from the GOH prior to closure of the established bidding window. END Note.) In a phone call to EconChief, Flores Lanza undertook to comply fully with all transparency requirements indicated in CAFTA, but in a formal July 6 written response committed only that the bid would be 
&published and released to all the identified parties.8 ¶3. (C) As one of the few firms with sufficient storage capacity to facilitate nationalized imports, Honduran retailer DIPPSA continues to play a potentially key role in the upcoming national bid for all the country,s fuel needs (reftels). (Comment: Post understands that DIPPSA has a 300,000 barrel storage capacity in Tela, on the Atlantic coast, and 420,000 barrel capacity in the Pacific's Gulf of Fonseca, the latter shared 50/50 with U.S. firm Esso but operated by DIPPSA. Per Esso representatives, the combined capacity may be enough to hold the country,s regular and premium gasoline supplies for two-to-three weeks. A company seeking to participate in the national bid could then bid and win on refined gasoline without having to face a potential standoff with Texaco over the use of their facilities. END Comment). ¶4. (C) On July 6, DIPPSA owner Henry Arevalo met with the Ambassador and EconOffs and indicated that a recent PDVSA delegation had inspected DIPPSA storage facilities on both the Atlantic and Pacific coasts and reportedly made inquiries about access to those facilities. According to Arevalo, however, this delegation did not make a formal offer to purchase DIPPSA. On previous occasions Arevalo was repeatedly led to believe PDVSA intended to purchase DIPPSA, either directly, or through various front-company structures. (Comment: Post now believes at least one of these companies, PetroCARSA, was a hollow shell, created by dealmaker (or con-man) Adrian Recca to promote the DIPPSA sale. Arevalo recently found out that PetroCARSA is majority-owned by Recca and is capitalized at a mere USD 1,300. Recca is believed to be representing the interests of former President of Honduras Rafael Leonardo Callejas. END TEGUCIGALP 00001238 002 OF 003 comment.) PDVSA has previously had at least one other high-level delegation arrive in Honduras, on June 10th, headed by PDVSA Vice President Alejandro Granado and Managing Internal Director Asdrubal Chavez, among others. Both men also share board membership in PDVSA,s U.S. subsidiary, CITGO. Chavez is a first cousin of Venezuelan President Hugo Chavez. Unconfirmed reports indicate PDVSA representatives also visited Honduras the week of July 3. ¶5. (C) Arevalo maintained that without additional resources he will never be able to survive the upcoming national bid process, nor sustain continuing operating losses as his company is obliged to continue absorbing GOH-mandated price freezes on gasoline pump prices. Selling 50 percent of the company (for approximately USD 30 million) to a global player will allow his business to survive. (Comment: Other observers have speculated that Arevalo is "in over his head" with the over USD 50 million in debt he assumed when he bought out former partner Jose Lamas earlier this year, and that he desperately seeks a white knight to re-capitalize the venture. END Comment.) Arevalo continued to play down a potential purchase by PDVSA, however, and indicated that discussions were further along with oil trader Trafigura Beheer B.V., a Dutch oil trading and storage company. Per Arevalo, auditors from Trafigura were currently in DIPPSA facilities doing due diligence analysis. Bid consultant Meyeringh, in one of his many complex relationships, was a former employee and investor in Trafigura,s COPENSA subsidiary, and helped them develop their storage facilities in Guatemala. When asked previously, Meyeringh admitted that he is a partner, but a "very minor one" who exercises no management functions. It is unclear whether Meyeringh in any way facilitated Trafigura's interest in Honduras. ¶6. (C) Headquartered in Holland, with principle trading offices in Switzerland, Trafigura has over 55 trading offices in 36 countries, and specializes in the transport, storage and retail of petroleum products. In Central America, Trafigura owns considerable storage facilities in Guatemala (through COPENSA),and a growing network of PUMA branded retail gasoline stations throughout Guatemala, El Salvador, and Honduras. Combined with DIPPSA, the company would have in Honduras over 130 gas stations, strategically placed storage facilities, and a truck fleet. ¶7. (C) Trafigura,s owner, Wilmer Ruperti Perdomo, is rumored to have close connections with Venezuelan President Hugo Chavez, and played a key role helping Chavez survive the potentially devastating oil strikes in 2002 and 2003. In 2005, press reports indicated that PDVSA was double billed by Trafigura for a fuel shipment valued at USD 14 million, but an ensuing investigation by PDVSA was inconclusive (COMMENT: The implication was that Chavez was rewarding his confidant. END COMMENT). Trafigura, founded in 1993 by former employees of Marc Rich,s oil trading company Glencore, was also implicated in the 2001 UN oil- for-food scandal. ¶8. (C) On July 7, the Ambassador and EconOff met with Banco Atlantida President Guillermo Bueso; Atlantida is one of two banks that Arevalo says lent him money to complete the purchase of DIPPSA earlier this year. Bueso confirmed Trafigura's interest in purchasing DIPPSA, but said that his bank had first option to purchase up to 10 percent of DIPPSA in the event of a sale. (COMMENT: He also said another bank had a 10 percent option. This conflicts with Arevalo,s account, when he maintained that he had control of all the shares. According to Arevalo, the bank attempted to acquire such rights, but was beaten back with the assistance of another powerful banker, Jorge Bueso. END COMMENT). ¶9. (C) Guillermo Bueso went on to detail a potential exit strategy from the fuel situation that he will outline to Honduran President Jose Manuel &Mel8 Zelaya Rosales this week. Bueso believes that Zelaya should await the results of the bid, than declare them uncompetitive while moving TEGUCIGALP 00001238 003 OF 003 aggressively to review the entire price-setting formula. With all parties around the same table and a sense of urgency, Bueso believes that Zelaya could find savings while providing a clear path to market liberalization. (COMMENT: This plan is very similar to Post's own thinking. END COMMENT). ¶10. (C) COMMENT: A DIPPSA sale to Trafigura may be the lesser of two evils. While Trafigura could patch together an impressive network of storage, transport and retail fuel facilities in Central America, it would be difficult for it to tap into the preferential financing offered by PDVSA through PetroCaribe. But, given its historical ties to PDVSA, Trafigura could be well-positioned to win some portion of the upcoming national bid, and could still help distribute Venezuelan fuel to FMLN and Sandinista municipalities in El Salvador and Nicaragua. Post has no evidence to indicate -- but does not discount the possibility -- that Trafigura in this case could be working in concert with PDVSA. Post notes that Arevalo has visited Venezuela recently, and might have encouraged such a Trafigura/PDVSA alliance to give him the fig-leaf of commercial respectability he seeks. A Trafigura investment could allow for PDVSA access to the Honduran market, without the negative political connotations of a deal with PDVSA itself. On the other hand, Trafigura affiliate Puma is aggressively expanding in Central America, and it remains possible that Trafigura is interested in a partnership with DIPPSA simply to continue that growth strategy. ¶11. (C) COMMENT CONTINUED: It remains to be seen if Atlantida's Bueso can affect the outcome of a GAME that appears to be entering its seventh inning stretch. If the national bid is allowed to proceed to conclusion, then fails for not delivering the savings, it is hard to believe that the forces backing the bid will stand idly by while another option is pursued. However, if President Zelaya can manage this transition with authority, and actually find real savings by reforming the admittedly inefficient national pricing formula for gasoline, he may yet be able to turn the situation in his favor. END COMMENT. FORD FORD