AES TO "DOUBLE DOWN" WITH $1.3 BILLION IN CAMEROON

C O N F I D E N T I A L SECTION 01 OF 02 YAOUNDE 000758 SIPDIS STATE ALSO FOR AF/C, AF/EPS AND EEB TREASURY ALSO FOR FRANCOIS BOYE STATE PASS TO USTDA FOR PAUL MARIN AND LIDA FITTS E.O. 12958: DECL: 07/28/2018 TAGS: ENRG EINV ECON ETRD CM SUBJECT: AES TO "DOUBLE DOWN" WITH $1.3 BILLION IN CAMEROON REF: YAOUNDE 503 (NOTAL) Classified By: Political officer Tad Brown for reasons 1.4 b and d. ¶1. (U) Summary: In a July 24 meeting with President Biya, Paul Hanrahan, CEO of American power company AES, dismissed allegations of AES' flagging commitment to Cameroon and promised that AES' new investment would top $1.3 billion by ¶2011. Explaining that AES had rebuffed overtures from sovereign wealth funds for its Cameroon holdings, Hanrahan announced that AES would form an African power company, headquartered in Douala, to manage new investments in Cameroon and across the continent, a development received by Biya with visible glee. Despite persistent detractors within the Government of Cameroon (GRC),AES remains highly popular with Biya himself, and the announcement was well-timed for Biya and the GRC, who are seeking positive economic news. End summary. Biya's Warm Welcome =================== ¶2. (C) As the Ambassador explained in an Embassy-hosted briefing before Hanrahan's July 24 call on Biya, AES' commitment to Cameroon has been questioned by a number of high-ranking GRC officials who have intervened to stall high priority energy projects. Biya's warm reception of Hanrahan, however, belied the claims that Biya himself had become frustrated with AES. Biya was effusive in his praise of AES and apologized for his "overzealous administrators" who had not yet accepted that AES SONEL is no longer under the command of the Presidency. In this vein, Biya apologized for the heavy-handed manner in which the GRC had nominated a Deputy General Manager to the AES Board. Recalling that it was the GRC's prerogative to have a presence on the board, Biya said the GRC would submit a new slate of candidates for AES' consideration. Biya asked Hanrahan to speed up development of a new heavy fuel power plant at Kribi. AES to "Double Down" ==================== ¶3. (SBU) Admitting that AES had made initial mistakes after taking control of SONEL, Hanrahan emphasized AES' commitment to retaining its concession in Cameroon and pointed out that the process in Cameroon still viewed as a model for such privatizations. Having rebuffed a number of offers to purchase its Cameroon assets, AES was "doubling down" on Cameroon, with a total of $1.3 billion in new investment by 2011 and the creation of a new entity, the West African Power Company (WAPCO),to be headquartered in Cameroon, that would help channel capital from AES and other investors into the African energy sector. Biya was visibly delighted at the news and promised Hanrahan that AES would have his full support. Difficult Negotiations Ahead ============================ ¶4. (SBU) Turning to the Kribi project, Hanrahan said AES was impatient to advance the project but was still awaiting the GRC's agreement to include standard political risk, price volatility guarantees and related language in the agreement, as required by the project financers (including the World Bank and other IFIs). Biya promised he would personally follow up with the head of the National Hydrocarbons Company, with whom AES is negotiating the deal, to remove any obstacles. In response to Biya's request that Hanrahan facilitate the agreement of a power deal with aluminum smelter ALUCAM, a joint venture between the GRC and Rio Tinto, Hanrahan said he would reach out to senior levels at Rio Tinto to jumpstart the negotiations (reftel). Comment: Right Message, Right Time ================================== ¶5. (C) Hanrahan's visit could not have come at a better time for AES or the GRC. Biya was so pleased with the outcome that he sent an emissary to present a personal gift and note to Hanrahan during an Embassy-hosted lunch for staekholder agencies, a gesture that was not lost on the half-dozen ministers present at the event. For AES' part, Hanrahans' visit and Biya's support will serve to strengthen AES' position in negotiations regarding the Kribi project, the ALUCAM contract, and the selection of the new Deputy General Manager. We will seek to capitalize on Hanrahan's YAOUNDE 00000758 002 OF 002 warm reception to ensure fair treatment for AES. End comment. GARVEY