Contract Signed for Egypt's First Nuclear Plant

UNCLAS CAIRO 001176

SENSITIVE
SIPDIS

STATE FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECON EINV EFIN ETRD ENRG PGOV PREL EG AS
SUBJECT: Contract Signed for Egypt's First Nuclear Plant

REF: A. CAIRO 25

B. CAIRO 862


1. (SBU) Key Points

-- On June 18, 2009, the GoE signed an agreement with the Australian
firm WorleyParsons to provide consultancy to help develop Egypt's
first nuclear power plant.

-- Bechtel had been engaged in months of negotiations with the GOE,
but ultimately Bechtel's tender offer to provide consultancy was
excluded by the Ministry of Electricity and Energy (MoEE) on April
29, 2009.

-- Though Worley is an Australian firm, it has major U.S. operations
and we expect significant U.S. content in the new plant.


2. (SBU) On June 18, 2009, WorleyParsons Ltd. signed a contract with
the Egyptian Ministry of Electricity and Energy for the development
of Egypt's first Nuclear power plant. Ambassador Scobey, Australian
Ambassador Stephanie Shwabsky, and Egyptian Prime Minister Dr. Ahmed
Nazif were present at the signing along with Worley's President, Ron
McNeilly and Dr. Rames Khalil, Worley's Regional Power Manager for
Egypt and Africa.


3. (SBU) Khalil told us he expects significant U.S. content in the
project, including U.S. engineers employed to build local capacity
and transfer technology to the Egyptian side. WorleyParsons plans to
bring nuclear engineers from the United States (where they have
1,500 engineers) and Bulgaria to work with and instruct their
Egyptian counterparts. In addition to the United States, Russia,
France, and China have indicated interest in becoming involved in
the nuclear project.


4. (SBU) COMMENT: The Ambassador attended the signing ceremony in
order to convey USG support for Egypt's civil nuclear power program
and for the expected U.S. component in the upcoming project. With
over 40% of its assets based in the United States, WorleyParsons has
a large U.S. presence. The company employs more than 1,500 American
employees in 24 offices in the United States. Despite
disappointments surrounding Bechtel's failed negotiations, now that
WorleyParsons has completed tender negotiations and signed the
agreement with the GOE, we consider this a closed deal and will
support U.S. inclusion in Egypt's nuclear power program as much as
possible through this agreement. End Comment.


5. (SBU) BACKGROUND: In December 2008, the Egyptian Nuclear Power
Plants Authority (NPPA),part of the Ministry of Electricity and
Energy, awarded Bechtel Power Corporation a 10-year contract worth
$188 million to consult on and help design Egypt's first nuclear
power plant (reftel A). A committee formed from different government
agencies selected Bechtel over seven other corporations. However,
during the negotiation phase, one of the main points of contention
between Bechtel and the GOE was the issue of nuclear insurance
liability. After many delays, this issue was eventually resolved by
Bechtel agreeing to NPPA's requests.


6. (SBU) On April 29, Bechtel received a letter from the NPPA
stating that their proposal was not compliant with the tender
document and was therefore excluded (reftel B). On May 1, the
Australian firm WorleyParsons began contract negotiations with NPPA
to provide consulting services to help build Egypt's nuclear power
plant.


7. (U) WorleyParsons Limited is Australia's largest engineering firm
and is also one of the world's largest engineering design firms.
Formed in the 2004 merger between Parsons E&C and Worley
Engineering, the company has designed, constructed, or managed the
construction of more than 250 gas processing plants, 600 chemical
and petrochemical facilities, and 370 power plants worldwide.
WorleyParsons is traded on the Australian stock exchange and over
40% of the company is made up of U.S. assets. The company has a
market capitalization of greater than $3.1 billion. WorleyParsons
has 114 offices globally including 24 in the U.S. and a U.S.
headquarters in Houston. It employs 31,700 people including 6,000 in
the United States.

SCOBEY