Identifier
Created
Classification
Origin
07VIENTIANE351
2007-04-30 08:54:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Vientiane
Cable title:  

PRESSING THE AES HYDROPOWER BID WITH SENIOR LAO

Tags:  ECON ENRG ETRD EWWT LA PHUM PREL SENV EINV 
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PP RUEHCHI RUEHDT RUEHHM
DE RUEHVN #0351/01 1200854
ZNR UUUUU ZZH
P 300854Z APR 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC PRIORITY 1168
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 2162
RHHMUNA/CDR USPACOM HONOLULU HI
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 03 VIENTIANE 000351 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS (BESTIC)
STATE FOR EEB/ESC
STATE PASS USTR FOR DAVID BISBEE
STATE PASS TO USED WORLD BANK
MANILA FOR USED ADB
COMMERCE FOR H.P. PHO
COMMERCE FOR ADVOCACY CENTER
PACOM FOR POLAD

E.O. 12958: N/A
TAGS: ECON ENRG ETRD EWWT LA PHUM PREL SENV EINV
SUBJECT: PRESSING THE AES HYDROPOWER BID WITH SENIOR LAO
OFFICIAL

REF: A. VIENTIANE 0312


B. VIENTIANE 0167

C. VIENTIANE 0300

D. VIENTIANE 0341

E. VIENTIANE 0259

This cable is SENSITIVE BUT UNCLASSIFIED: please handle
accordingly.

UNCLAS SECTION 01 OF 03 VIENTIANE 000351

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS (BESTIC)
STATE FOR EEB/ESC
STATE PASS USTR FOR DAVID BISBEE
STATE PASS TO USED WORLD BANK
MANILA FOR USED ADB
COMMERCE FOR H.P. PHO
COMMERCE FOR ADVOCACY CENTER
PACOM FOR POLAD

E.O. 12958: N/A
TAGS: ECON ENRG ETRD EWWT LA PHUM PREL SENV EINV
SUBJECT: PRESSING THE AES HYDROPOWER BID WITH SENIOR LAO
OFFICIAL

REF: A. VIENTIANE 0312


B. VIENTIANE 0167

C. VIENTIANE 0300

D. VIENTIANE 0341

E. VIENTIANE 0259

This cable is SENSITIVE BUT UNCLASSIFIED: please handle
accordingly.


1. (SBU) Summary: The Ambassador met with Committee for
Planning and Investment (CPI) President Soulivong Daravong
April 30 to continue her personal support for the bid by AES
on the first run-of-the-river hydropower project on the
Mekong River in Laos. Soulivong was clear that CPI had not
made its own recommendation but had only reported to the
Prime Minister's Office (PMO) on the three bidders, listing
each by strong points. He added that the weakness of the AES
proposal, however, was the lack of a marketing program
element. The Ambassador took advantage of the meeting to
raise two other cases involving smaller U.S. companies,
Natural Products Inc. and Friend of the Upland Farmer. End
summary.

AES
--------------

2. (SBU) The Embassy requested an appointment April 23 with
the PMO for the Ambassador to personally deliver the letter
from Secretary of Commerce Gutierrez to Lao Prime Minister
Bouasone Bouphavanh supporting the AES bid. The PMO asked
the Embassy instead to deliver the letter to CPI President
Soulivong -- a minister-level senior official and former
Minister of Commerce. Due to the delay, the Embassy
delivered copies of Secretary Gutierrez's letter to both the
PMO and CPI in advance of the Ambassador's April 30 meeting
with CPI President Soulivong.


3. (SBU) Soulivong was well aware of the competition
involving AES and had read Secretary Gutierrez's letter by
the time he met with the Ambassador. He agreed with the
Ambassador that a successful bid by a major American investor

such as AES would send a very positive message about the
climate for foreign investors in Laos. The Ambassador also
made very strong points about AES' experience in the
hydroelectric and power generating fields and stressed the
capacity of AES to live up to the increasingly important
environmental standards set by the debate over constructing
the Nam Theun 2 dam project. She pointed out that these
standards will be raised by NGOs and environmentalists
because of both the sheer size of this project ($1.5 billion)
and the fact it will be the first dam project in Laos on the
Mekong River itself rather than on one of its tributaries.


4. (SBU) The Ambassador also cited the strength of AES,
because of its size and excellent track record, in accessing
the capital markets for funding for this project including
from the Asian Development Bank, World Bank, and private
lenders. Finally, she pointed out that relying only on one
company or one country as an investor weakens the position of
Laos by limiting its ability to generate real competition
over the terms and conditions of bids. (Note: the other two
companies competing with AES for this project are both from
Thailand.)


5. (SBU) According to Soulivong, CPI had finished its role in
the process of vetting the bidders on this project. CPI had
written a report on the top three bidders which included a
matrix of the strong points of each bidder. He specified
that CPI did not include a recommendation. It saw its role
as providing a summary of the bidding companies which was as
neutral and professional as possible. Soulivong noted that
each of the bidding companies was strong in different areas.
The CPI report had gone to the Prime Minister's Office for
final selection. CPI President Soulivong told the Ambassador
he is not part of the final selection committee.


6. (SBU) Even though the CPI report did not include weak

VIENTIANE 00000351 002 OF 003


points of the bidders, Soulivong made clear the AES bid
proposal, in contrast to the bids of the two competing
companies, lacked a specific marketing element. Both other
proposals apparently included an element discussing marketing
to the major logical consumer of the electricity to be
generated by the project -- the Electrical Generating
Authority of Thailand (EGAT). Both apparently had included
summaries of their discussions with EGAT. (Note: PolOff
discussed this with an AES official after the meeting and was
told that the AES proposal had only included references to
Thailand and Vietnam as potential consumers of the
electricity from this project without more specific marketing
information.)

The Khamsone Case
--------------

7. (SBU) The Ambassador took advantage of the meeting to
raise the case of Mr. Khamsone Baccam, an employee in
northern Oudomxay Province of the American-owned company
Natural Products Inc. (NPI). Khamsone was taken into custody
by the Oudomxay Provincial Police on January 18. However,
his family has not received any information about his status
or the charges against him (refs B, C, D). The Ambassador
provided Soulivong with a copy of a diplomatic note the
Embassy sent to the Foreign Ministry about the case on
February 20.


8. (SBU) Although Khamsone is a Lao citizen, the Ambassador
pointed out his apparent arrest is significantly disrupting
NPI's business activities since he was the purchasing agent
for soybeans from 300-400 farmers in Oudomxay Province for
NPI, which is located in neighboring Bokeo Province. NPI
uses the soybeans for a corn-soy blend for the World Food
Program. This disruption of business activity is sending a
negative message about Laos to other potential American
investors. The Ambassador asked CPI President Soulivong to
help look into the case. If Khamsone has been involved in
any wrongdoing, charges should be brought, and the case
should proceed in a transparent manner.

The FUF Case
--------------

9. (SBU) The Ambassador also raised the case of AmCits Peter
and Ruth Dutton who operate a business called Friend of the
Upland Farmer (FUF) in northwestern Luang Namtha Province.
Although CPI gave FUF a license to invest for 15 years in
1998, FUF has been unable to get its operating licenses
renewed by central and provincial Agriculture, Commerce, and
Finance Ministries/Departments since 2005 (ref E). The
Duttons had been talking to lower-level officials at CPI, and
the Ambassador expressed hope CPI President Soulivong might
be able also to assist resolving this situation.

Comment
--------------

10. (SBU) The Embassy has been working closely with AES to
support its bid -- the first major bid by an American
investor. Thus we were a bit troubled to hear that AES
missed what seems to the Embassy to be logical steps in
bidding on a project of this magnitude in Laos. To not have
included in the bid proposal a serious marketing element
seems like a serious oversight. AES's competitors, both
apparently Thai companies, obviously have an edge in dealing
with EGAT. However, AES should not have overlooked trying to
establish its own relationship with EGAT and including that
in its bid proposal. Moreover, AES has major energy
investments in Vietnam and could have used its connections
with the Vietnamese to help offset any advantages of its Thai
competitors.


11. (SBU) Moreover, while AES representatives met with a
range of Lao Government officials, including the Ministers of
Commerce and Energy in the company of the Ambassador and
other working-level officials in the company of EconOff (ref
A),we were surprised to learn that AES representatives have
apparently failed to meet with the heads of the World Bank

VIENTIANE 00000351 003 OF 003


and ADB here in Vientiane and the World Bank regional head in
Bangkok. All of these financial sector officials have
interest in major hydropower projects because of their
experience with the Nam Theun 2 project and may have been
able to help provide AES with suggestions to strengthen its
bid -- especially in regards to the newer environmental
standards set by the Nam Theun 2 project -- an opportunity
now no longer available.


12. (SBU) From what President Soulivong told the Ambassador,
it may already be too late to influence the Prime Minister's
impending decision -- originally expected by the end of
April. AES's only option at this point may be to try to
combine forces with its Thai competitor to remain in the game.
HASLACH