SMALL U.S. INVESTMENT IN ELECTRICITY GENERATION

C O N F I D E N T I A L CARACAS 000981 SIPDIS ENERGY FOR CDAY AND ALOCKWOOD HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK NSC FOR RKING USDOC FOR 4332 MAC/ITA/WH/JLAO E.O. 12958: DECL: 07/29/2019 TAGS: ECON EINV ENRG VE SUBJECT: SMALL U.S. INVESTMENT IN ELECTRICITY GENERATION REMAINS IN LIMBO REF: A. 2007 CARACAS 59 ¶B. CARACAS 592 Classified By: Economic Counselor Darnall Steuart for reasons 1.4 (b) and (d). ¶1. (C) Acting through its European subsidiary, PSEG Global LLC, a New Jersey-based company, sent Rafael Ramirez, Minister of Energy and Petroleum (MEP),a letter July 22 requesting the reinitiation of negotiations over the GBRV's intended nationalization of Turboven, a group of companies with a small investment in electricity generation in which PSEG Global has a 50 percent stake. In this letter, PSEG noted its acceptance of the jurisdiction of the International Centre for Settlement of Disputes (ICSID) pursuant to the bilateral investment treaty between Venezuela and the Netherlands. Nelson Garcez (strictly protect throughout), Managing Director of PSEG Europe, explained to Econoff July 27 that PSEG wished to keep the option of filing for arbitration open but hoped to resolve the issue through negotiations. ¶2. (C) Turboven has a generating capacity of 120 MW and mainly supplies manufacturing companies located in several industrial parks in Aragua state. President Chavez and the GBRV included Turboven's operations in the 2007 announcement of intent to nationalize private companies in the electricity sector (ref A). Turboven and PSEG subsequently entered into negotiations with MEP for the acquisition of Turboven by PDVSA, but these negotiations were suspended in early 2008. According to Garcez, Turboven and PSEG have been seeking to reinitiate negotiations for several months but have received contradictory signals and cannot find people at the right level with whom to talk. PSEG is eager to complete a deal, as it does not want to invest further in Turboven and as Turboven is not being paid in full for the electricity it is supplying to CADAFE, a state electricity company. ¶3. (SBU) Comment: Turboven's situation is similar, but not identical, to the situation many recently nationalized oilfield services companies found themselves in (ref B). Whereas PDVSA has taken over the operations of the latter companies, Turboven continues to operate as a private company. As with the oilfield services companies, Turboven is seeking clarification as to its legal status (given the nationalization announcement),is having trouble finding a negotiating partner within MEP (or PDVSA),and is unable to collect full payment from the state-owned company which is one of its clients. End comment. CAULFIELD