US embassy cable - 02TEGUCIGALPA2857

UNCLAS TEGUCIGALPA 002857 
 
SIPDIS 
 
SENSITIVE 
 
GUATEMALA FOR COMATT: DTHOMPSON 
STATE FOR WHA/CEN 
 
E.O. 12958: N/A 
TAGS: ENRG, EPET, EINV, ECON, HO 
SUBJECT: EMBASSY ADVOCACY FOR AES AS THE DECISION ON THE 210 
MW CONTRACT APPROACHES 
 
REF:  a) 01 TEGUCIGALPA 2872, b) TEGUCIGALPA 02207 
 
1. (SBU) The Embassy continues to advocate strongly for a 
transparent process that will treat American investors 
fairly, as the state electricity company ENEE's decision on 
the winner of the 210MW electricity tender approaches. 
ENEE's decision, like the bid opening itself (ref b), has 
been postponed several times.  It now appears that the 
announcement may occur by October 14.  Rumors continue to 
swirl of corruption and political intrigue.  High level GOH 
officials were surprised by the unexpectedly low prices bid 
by the domestic companies.  AES is the only U.S. firm to bid 
on the project; if AES wins the bid, this power contract 
will allow it to proceed with financing and construction of 
its LNG-fuel combined-cycle El Faro project.  With its usd 
650 million investment, its low cost per kilowatt hour and 
its benefits for regional integration, the project would be 
a boon to Honduras. 
 
2.  (SBU) In response to advocacy requests by AES throughout 
the summer and fall, Emboffs have taken all available 
opportunities to demonstrate USG interest in the fairness of 
the process.  On Monday, October 7, then-Charg d'Affaires, 
Roger Pierce spoke with Luis Cosenza, Minister of the 
Presidency, to raise the issue of the energy bid and 
emphasize the importance of a fair and transparent process. 
A followup conversation is planned for October 11. 
 
3. (SBU) Econcouns reinforced this message with Presidential 
Advisor Ramon Medina Luna on October 7, and with Investment 
Minister, Camilo Atala, on October 10.  She emphasized the 
importance of the project as an indication of Honduras' 
ability to attract sizable foreign investment.  She flagged 
the possible timing problem of an announcement occurring 
after the President, Luis Cosenza, Camilo Atala and other 
high level officials leave the country for a trip to Europe 
and Asia (providing more opportunity for undue pressure). 
Atala indicated that the GOH intends to have the 
announcement occur before President Maduro's departure for 
Europe on October 15 for that very reason.  Finally, she 
asked if it were possible that a firm that did not comply 
with all the tender requirements could be declared winner (a 
veiled but clear reference to the rumor that is circulating 
that AES's closest competitor, Lufusa, omitted from its 
offer a commitment to build a usd 20 million transmission 
facility).  Atala acknowledged familiarity with this issue 
and responded that such a firm would be disqualified. 
 
4.  (SBU) Also on October 10, Emboff was in contact with the 
Commerce Department advocacy center and AES local 
representative, Carlos Pineda, to confirm appropriate 
wording for a possible advocacy letter for AES to be sent to 
President Maduro from Commerce Secretary Evans.  The letter 
emphasizes the proposed AES plant would be a regional power 
facility, supplying power to Honduras, El Salvador, 
Guatemala and elsewhere.  It cites the benefits in terms of 
job creation, lower cost of electricity, and the 
introduction of an environment friendly fuel, liquid natural 
gas.  The letter continues on to request that the bid 
process be followed strictly, that all participants have a 
level playing field and that there be maximum transparency. 
 
5. (SBU) Background:  Since the bid opening, there has been 
a raging war in the press between the two most competitive 
bidders, AES and the Honduran firm Lufusa (ref b).  As the 
contest entered the endgame, there have been increased 
rumors and allegations of Honduran firms offering bribes. 
The lack of a disqualification of Lufusa, because of its 
failure to include the cost of building a new substation and 
associated transmission lines, worried local AES reps that 
the intrigue might be yielding fruit.  Embassy strategy has 
been to ensure that the GOH is fully aware that the USG is 
watching the process closely and aware of the details. 
Opponents of the AES project have also advocated 
disqualification of the U.S. company because of financial 
setbacks of its parent company. 
 
6. (SBU) Embassy will continue to engage high-level GOH 
officials on the importance of the transparency and fairness 
of the tender process, fair treatment of U.S. investors such 
as AES, and the benefits of the El Faro project. 
Palmer