VZCZCXYZ0000
RR RUEHWEB

DE RUEHCH #0272 0721212
ZNY CCCCC ZZH
R 121212Z MAR 08
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 6414
INFO RUEHBM/AMEMBASSY BUCHAREST 4285
RUEHKV/AMEMBASSY KYIV 0596
RUEHMO/AMEMBASSY MOSCOW 3264

C O N F I D E N T I A L CHISINAU 000272 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/UMB 
 
E.O. 12958: DECL: 03/12/2018 
TAGS: ECON ENRG PGOV PREL PBTS MD
SUBJECT: GOM WILLING TO BUY ELECTRICITY FROM TRANSNISTRIA 
 
 
Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d) 
 
¶1. (C) SUMMARY: Minister of Industry Vladimir Antosii said 
that the Moldovan Government (GOM) was willing to buy 
electricity from Transnistria (TN) and that price, not 
politics, would drive any future decision to do so.  Antosii 
confirmed that Moldova's contract with Ukraine for supplies 
of electricity remained in force and allowed for a gradual 
price increase.  He also spoke positively about a planned 
U.S. investment in power generation.  We've advised the 
American investor about the challenges of investing in 
Moldova.  END SUMMARY. 
 
IMPORTS OF UKRAINIAN ELECTRICITY (ASSURED FOR NOW) 
--------------------------------------------- ----- 
 
¶2. (C) On March 7, econoff met Minister Antosii to discuss a 
potential U.S. investment in the energy sector and Moldova's 
energy imports.  Antosii confirmed that Moldova's July 2007 
agreement with Ukraine on electricity imports, which included 
a gradual price increase of 0.1 cent per kilowatt hour (kwh) 
per month, remained in force.  He said this agreement gave 
Chisinau time to increase domestic consumer tariffs and also 
met Ukraine's demand to (eventually) increase prices to the 
Ukrainian wholesale price.  Antosii expected a consumer 
tariff increase this summer. 
 
GOM WILLING TO BUY ELECTRICITY FROM TN 
-------------------------------------- 
 
¶3. (C) Antosii said the GOM had followed through on 
commitments to facilitate the export of electricity from the 
Russian-owned Moldavskaya GRES power plant in Cuciurgan.  He 
noted that the plant was currently producing 350 MW, 
supplying 250 MW to TN and exporting 100 MW to Romania. 
Anotosii said the plant had the capacity to export more, but 
cited technical limitations in the transmission lines.  When 
asked about purchasing electricity from Cuciurgan, Antosii 
said the GOM was open to the idea and that such a decision 
depended only on price.  As long as Ukraine provided 
electricity at below-market prices, he noted, Moldova would 
buy from Ukraine. 
 
POSSIBLE AMERICAN INVESTMENT IN POWER GENERATION 
--------------------------------------------- --- 
 
¶4. (SBU) Antosii was aware of a Moldovan-American joint 
venture plan to build a privately owned 120 MW natural gas 
fired power plant on the grounds of the state-owned utility 
"CET-1" in Chisinau.  He said he had signed a memorandum of 
understanding with the investors, moving the project through 
the government bureaucracy and gaining the blessing of the 
Prime Minister.  He expected a government decision approving 
the project by the end of March.  He added that Moldova's 
three state-owned power plants were open to foreign 
investment targeted at increasing existing capacity (not 
privatizing these assets).  He said the return on these 
investments was guaranteed because current Moldovan 
legislation required power distributors to purchase all 
locally produced energy first, and local production only 
covered about 30% of Moldova's needs. 
 
COMMENT 
------- 
 
¶6. (C) It seems that for now Moldova's contract with Ukraine 
for electricity supplies remains in place, allowing a gradual 
price increase to Ukrainian domestic market levels, but 
keeping prices low.  Because of the interconnected 
transmission systems, Ukraine cannot suspend exports of 
electricity to Moldova without affecting the Odessa region. 
The Moldovans understand this and have refused to pay any 
drastic price increase.  We've briefed the U.S. investor 
about the challenges of doing business in Moldova, noting 
government interference, corruption and rule of law issues, 
and specific problems in the energy sector.  We've discussed 
the end of USAID assistance to the national regulatory agency 
because of a lack of transparency and independence and some 
of the challenges faced by foreign investor Union Fenosa. 
The investor commented that Antosii had promised that the GOM 
could "force" the power-distribution companies to purchase 
all the electricity generated by the new plant.  While such a 
requirement exists under current Moldovan law, the tone of 
such statements is worrisome.  END COMMENT. 
KIRBY