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

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warm reception to ensure fair treatment for AES. End comment.
GARVEY