Embassy Nassau Response to OPIC-Supported Global Renewable

UNCLAS NASSAU 000605


WHA/CAR FOR JOSLYN MACK-WILSON
FOR BARBARA BRERETON, OPIC INVESTMENT FUNDS

E.O. 12958: N/A
TAGS: ECON EFIN
SUBJECT: Embassy Nassau Response to OPIC-Supported Global Renewable
Energy Investment Fund

REFTEL: STATE 095170



1. (U) The following information is provided in response to the
questions posed in reftel paragraph 5.

1) The need for renewable energy capital in the Bahamian Market:

The Bahamas is an archipelago with substantial potential wind, solar
and wave/current energy resources that are well suited to Renewable
Energy (RE) sector development. Its unique geography consists of
over 700 islands and 2000 cays - 24 of which are significant
population centers. The country enjoys a relatively high GDP and
has a democratically-elected government which is stable and highly
supportive of outside assistance for development projects. The
technology sector in The Bahamas is well-developed, but small.
Businesses in The Bahamas do not pay corporate taxes and established
business owners tend to maintain excellent accounting records.
Literacy is high and the business community is generally university
educated (most have studied in the United States). The nascent RE
sector in The Bahamas is gaining momentum as more Bahamians perceive
RE as a potentially profitable enterprise. Customs duties for RE
technology have recently been substantially reduced. These
conditions make The Bahamas an ideal location as well as an
excellent testing ground for the USRG fund's targeted investment
program in profitable companies.

Public and private sector officials have frequently cited the need
for The Bahamas to diversify its economy. RE sector development is
a potential source of employment for a country where the current
unemployment rate is 17 percent. An infusion of RE capital and
expertise into The Bahamas for planned energy projects such as ocean
thermal energy conversion, solar water heating systems, retrofitting
of public buildings with RE systems, wind power assessments and
biofuels generation would likely be welcomed and would boost the
economy. The success of private-sector RE projects in The Bahamas
may further encourage the government-owned Bahamas Electricity
Corporation to adapt to this new paradigm, thereby saving the
government significant amounts of capital in fossil fuel import
costs.

The GCOB's National Energy Policy Committee recently released to the
public its first report on the National Energy Plan. This report
outlines both short and long-term strategies for incorporating
Renewable Energy (RE) technologies into the traditional fossil
fuel-based energy infrastructure. The report's "vision statement"
explicitly promotes the development and use of RE sources and
further commits to legislative reform in order to facilitate
alternative energy use:

"The Bahamas will become a world leader in the development and
implementation of sustainable energy opportunities, by aggressively
re-engineering our legislative, regulatory and institutional
frameworks; retooling our human resources and implementing a diverse
range of well researched and regulated, environmentally sensitive
and sustainable energy programmes and initiatives, built upon our
geographical (both proximity and diversity),climatic (sun, wind and
sea),and traditional economic strengths (tourism and banking)."

2) Availability of Funds from Other Sources:
Since December 2008, the Inter-American Development Bank has
supplied the GCOB with approximately $2,030,000 in funding for
sustainable energy and energy efficient projects in The Bahamas.
Although substantial, the IDB representative to the Bahamas told
ECONOFF that The Bahamas will need additional financial support in
order to achieve all of its RE objectives over the next 10 years.

3) Local Reputation of the Prospective Fund manager:

The prospective fund manager is not known to government nor
private-sector officials in The Bahamas.