US embassy cable - 02TEGUCIGALPA3273

AES WILL CHALLENGE HONDURAN ELECTRICITY BID RESULTS

Identifier: 02TEGUCIGALPA3273
Wikileaks: View 02TEGUCIGALPA3273 at Wikileaks.org
Origin: Embassy Tegucigalpa
Created: 2002-12-03 21:08:00
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Tags: ENRG BEXP EINV ECON EAID PREL KJUS HO
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS TEGUCIGALPA 003273 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA, WHA/CEN, AND EB/CBA 
GUATEMALA FOR COMATT: DTHOMPSON 
 
E.O. 12958: N/A 
TAGS: ENRG, BEXP, EINV, ECON, EAID, PREL, KJUS, HO 
SUBJECT: AES WILL CHALLENGE HONDURAN ELECTRICITY BID RESULTS 
 
REF:  a) 01 TEGUCIGALPA 2872, b) TEGUCIGALPA 02207, 
 
c) TEGUCIGALPA 02857 d) TEGUCIGALPA 03184 
 
THIS CABLE REPLACES TEGUCIGALPA 03263 
 
1. (SBU) Summary.  AES and two other companies presented 
challenges to the State-owned electricity enterprise ENEE's 
decision to award Lufussa the contract for the 210MW bid. 
AES challenged ENEE's failure to disqualify Lufussa for the 
lack of inclusion of sufficient transmission facilities in 
its original bid, charging that Honduran law clearly did not 
permit the omission. AES has also charged that other 
companies should have been disqualified for not explicitly 
including their proposed type of fuel in the bid.  AES also 
found mathematical errors in the calculations used to 
determine the evaluated price that change the competitive 
order of company prices.  ENEE officials initially 
threatened to sue companies that used the legal appeals 
process, but GOH officials have discounted those threats. 
The prosecutor for anti-corruption and the Honduran 
Inspector General's office have both also announced they 
will investigate ENEE's conduct of the tender.  End Summary. 
 
2. (U) On November 26th, AES, Comercial Laeisz and the 
National Engineers' group all challenged the results of the 
210MW bid, arguing that Lufussa should have been 
disqualified as they did not include a required transmission 
line.  The challenges by the three companies also prompted 
investigations by the prosecutor for anti-corruption and the 
Honduran Inspector General's office who both announced 
November 27 that they too would be investigating the tender 
process.  The ENEE board of directors, by law, should decide 
on the three companies' appeals within five business days, 
although most expect it will take longer. 
 
3. (SBU) AES' challenge is based on the fact that Lufussa 
was allowed to modify its bid to include transmission lines 
which it omitted from the original bid packet; Lufussa added 
the transmission lines and substations after the July 26 bid 
opening when the company was able to review its competitors' 
bids.  AES believes this allowed Lufussa to design 
transmission capacity that ensured it the lowest 
transmission losses and therefore lowered its overall 
evaluated price per kilowatt hour (transmission losses play 
an important part in the calculation of evaluated price). 
In addition, neither Lufussa nor Comercial Laeisz included 
the type of fuel to be used, an automatic disqualification. 
AES believes it has a very strong legal case and at this 
point is willing to challenge the bid decision through the 
Supreme Court level if necessary. 
 
4. (SBU) With the help of considerable Embassy advocacy, AES 
finally received (on the day before the deadline to 
challenge the tender award) the data on assumptions and 
calculations that ENEE used to arrive at the evaluated 
price.  AES ran the numbers through the model and believe 
they found mathematical errors that would change the 
results, with Comercial Laeisz falling to third place and 
AES moving into a close second behind Lufussa.  The ENEE 
data also demonstrated that Lufussa did, in fact, have the 
lowest transmission losses.  AES strongly believes this was 
only possible due to Lufussa's ability to delay providing 
details on transmission until after seeing its competitors' 
bids. 
 
5. (SBU) ENEE and Honduran officials tried desperately to 
discourage these bid challenges.  Members of the "notables" 
committee charged with overseeing the process repeatedly 
stated no company should challenge the decision as it was 
unanimous, fair and transparent.  ENEE General Manager, 
Angelo Botazzi, told reporters the ENEE would counter-sue 
any company presenting a challenge to the bid (implicitly 
aiming this threat at AES).  Now that Honduran companies 
Comercial Laeisz and the National Engineers group have also 
challenged the result, there has been less talk of a counter 
suit.  GOH officials (ENEE board members, some Ministers and 
various Congressmen) have also tried to condition public 
opinion by claiming that the challenges will result in 
future blackouts and a potential energy crisis (since the 
appeals process could bog down in court cases).  AES's 
public comments have emphasized that it has only asked, at 
this time, for an administrative review by the ENEE board of 
directors, which shouldn't take more than 5-15 days. 
 
 
PIERCE 

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