This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS TEGUCIGALPA 003416 
 
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:  ENEE BOARD ANNULS BID FOR 210 MW CONTRACT; 
DECISION IN THE HANDS OF THE COUNCIL OF MINISTERS 
 
REF: a) 01 TEGUCIGALPA 2872 
 
     b) TEGUCIGALPA 02207 
     c) TEGUCIGALPA 02857 
     d) TEGUCIGALPA 03184 
     e) TEGUCIGALPA 3273 
 
¶1. (SBU) Summary.  On December 19, the Board of Directors 
for the State-owned electricity company ENEE announced the 
annulment of the bid for a 210 MW electricity contract.  In 
announcing the annulment, the Board said that the various 
legal challenges presented by bidders to the decision to 
award the contract to Honduran energy company Lufussa could 
tie up the bid process in the courts for years and lead to a 
potential national energy crisis.  The annulment moves the 
decision on what to do with the contract to the Council of 
Ministers which met early on December 20 to discuss options. 
AES' local representative (protect) reported to the Embassy 
rumors that the ministers are leaning to signing a direct 
contract with AES for the 210 MW.  End summary. 
 
¶2. (U) On December 19, the Board of Directors for the State- 
owned electricity company ENEE unanimously agreed to annul 
the public tender for a 210 MW electricity contract.  In a 
press conference, the President of the ENEE Board of 
Directors, Minister of Natural Resources Patricia Panting, 
remarked that the decision to annul the bid was taken to 
avoid a prolonged case in the court over the challenges to 
the decision to award the 210 MW contract to Honduran energy 
company Lufussa.  The Board feared that the legal challenges 
to the bid decision would tie up the bid contract in the 
courts for years and impede the creation of new energy 
capacity to meet Honduras' energy needs beginning in 2004. 
 
¶3. (U) On November 26, AES, Comercial Laeisz and the 
National Engineers group all challenged the results of the 
bid, arguing that Lufussa should have been disqualified for 
failing to include sufficient transmission facilities in its 
original bid offer (ref e). 
 
¶4. (SBU) In annulling the bid process, the ENEE Board of 
Directors has put the responsibility of taking a decision on 
the 210 MW contract in the hands of the Council of Ministers 
which met early on December 20 to discuss options.  AES' 
local representative reported to the Embassy that he has 
heard rumors from various sources that the Council of 
Ministers is leaning toward arranging a direct contract with 
AES for the 210 MW.  Another option is to redo the entire 
bid process.  Given the urgency in meeting Honduras' energy 
needs beginning in 2004, it seems unlikely that the GOH 
would embark on another public tender for the 210 MW. 
 
¶5. (U) Minister Panting reiterated that the bid process was 
clean and transparent and that the annulment was not related 
to any irregularities in awarding the contract to Lufussa. 
ENEE Director Angelo Botazzi echoed Minister Panting's 
remarks on the transparency of the process and stated that 
it is in the best interest of the country to avoid a 
prolonged legal battle in the courts which could leave 
Honduras without new energy capacity in 2004.  Botazzi 
warned of a potential energy crisis and alluded to the 
energy crisis of 1994, when the government's program to 
ration electricity led to prolonged blackouts across 
Honduras. 
 
¶6. (SBU) Embassy has continuously advocated for AES to 
receive fair treatment during the bid process.  Post is 
pleased that the GOH annulled the contract with Lufussa and 
would welcome a GOH decision to award the contract to AES, 
but notes that if this were to happen there would likely be 
negative public reaction by some interested parties. 
 
Palmer