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RR RUEHLH RUEHPW
DE RUEHIL #1659/01 1150551
ZNR UUUUU ZZH
R 240551Z APR 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 6647
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 4192
RUEHNE/AMEMBASSY NEW DELHI 3161
RUEHLO/AMEMBASSY LONDON 7772
RUEHML/AMEMBASSY MANILA 2976
RUEHKP/AMCONSUL KARACHI 9607
RUEHLH/AMCONSUL LAHORE 5358
RUEHPW/AMCONSUL PESHAWAR 4096
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RHMFISS/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ISLAMABAD 001659 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O.  12958:  N/A 
TAGS: EFIN ECON PGOV PREL EAID EINV ENGY PK
SUBJECT: AMBASSADOR'S MEETING WITH NEW MINISTER OF WATER AND POWER 
 
¶1. (SBU) SUMMARY:  Ambassador met with the Minister of Water and 
Power on April 21 to discuss Pakistan's plans for dealing with the 
current energy crisis.  The Government of Pakistan (GOP) emphasizes 
its desire to have more engagement with the U.S. on energy issues 
and specifically requests assistance in attracting investors to its 
energy sector, organizing an investment conference and exploring the 
possible development of the Thar coal fields.  The GOP also 
confirmed its full support to continue discussions for regional 
electric transmission lines with Central Asian states.  Payment of 
outstanding debts to U.S. companies, moving forward with the 
geophysical mapping survey and ending the fuel subsidies were also 
discussed.  Post requests assistance in providing resources on coal 
development to the GOP.  Post also requests that SCA and EEB discuss 
the possibility of funding a feasibility study on the Thar coal 
fields with USTDA. END SUMMARY. 
 
¶2. (U) Action Request see paragraph 11. 
 
--------------------------------------------- ---------- 
ENERGY TOP PRIORITY- INCREASED ENGAGEMENT WITH THE U.S. WANTED 
--------------------------------------------- ---------- 
 
¶3. (SBU) At the April 21 meeting with newly appointed Minister of 
Water and Power Mr. Raja Pervaiz Ashraf, Ambassador noted that he 
had one of the most challenging jobs in Pakistan and asked how the 
new government planned to develop additional energy generation for 
the country.  Ashraf noted that the "common man most feels the 
current power crisis and there simply is not a quick fix."  While 
noting that the new government planned to make energy a top 
priority, Ashraf placed blame squarely on the previous government 
which "failed miserably because they were unable to add a single 
megawatt to the national grid during nine years of power."  He 
emphasized that he "intended to rely on old PPP policies" of 
encouraging private sector development. (Comment:  Ashraf serves as 
the Secretary General for the Pakistan Peoples Party (PPP).  His 
comment refers to the previous PPP policy to increase the number of 
independent power producers in Pakistan. End Comment.) 
 
¶4. (SBU) (SBU) Ambassador welcomed Minsiter Ashraf's commitment to 
greater private sector investment and noted the U.S. is interested 
in helping Pakistan attract U.S investors to its energy sector.  She 
also urged the GOP to move forward with planning for an Energy 
Investment Conference in the U.S within the next few months.  Ashraf 
welcomed U.S support in this endeavor and noted that Pakistan wanted 
to actively recruit U.S. investors to the local energy sector. 
 
¶5. (SBU) Ashraf also requested U.S. assistance to explore 
development opportunities on the Thar coal fields in the sourthern 
province of Sindh and noted that the Ministry of Water and Power 
hopes to hold a seminar on coal development to bring together 
experts and investors.  Ashraf requested U.S. assistance to help 
organize and encourage participation in this seminar which the GOP 
would like to have in Islamabad in either late May or June. 
 
¶6. (SBU) Ambassador noted that late last year the Embassy was close 
to getting GOP approval to conduct an aerial geophysical survey of 
Pakistan to "map" the country for a wide variety of new data, 
including the location of mineral and energy resources, underground 
water, seismic fault lines and topographical data useful for 
infrastructure projects.  The Naval Research Laboratories and U.S. 
Geological Survey would fund the USD 20 million project and the 
Ambassador asked Ashraf to help secure support for this project to 
move forward soon. Ashraf was not familiar with the project but 
noted that it "sounds very promising" and asked for follow up 
information from the Embassy. 
 
¶7. (SBU) Ambassador also asked about the new government's commitment 
to the "CASA 1000" project which would bring 1000 MW of electricity 
to Pakistan's national grid at an interchange in Peshawar via 
exports from Tajikistan and the Kyrgyz Republic.  Ashraf noted that 
he is "very keen to move forward on the project and would welcome a 
Ministerial level meeting to further engage" in the discussions. 
 
¶8. (SBU) Ambassador also noted that the U.S. is interested in 
holding another session of the Energy Dialogue soon.  She noted that 
previous energy dialogues have not been as effective or as active as 
we would like but that we want to engage with Pakistan and 
revitalize these discussions. Ashraf pledged his support to make the 
Dialogue "as productive as possible." 
 
 
ISLAMABAD 00001659  002 OF 002 
 
 
---------------------- 
SUBSIDIES AND PAYMENTS 
---------------------- 
 
¶9. (SBU) Responding to the Ambassador's question about the 
continuation of fuel subsidies, Ashraf noted that the new government 
was "facing the accumulating impact of subsidies and high 
international prices." He noted that a high level GOP internal 
meeting would be called soon to discuss how to manage the subsidies. 
 Ashraf stated that "if the current government were to keep pace 
with international prices and take away the subsidies, then they 
would not be able to stay in power." 
 
¶10. (SBU) Ambassador also inquired about the outstanding payments to 
U.S. energy companies in Pakistan such as AES.  Ambassador explained 
that the USD 103 million debt from the Water and Power Development 
Authority (WAPDA) is creating ripple effects on AES's ability to 
produce power because now Pakistan State Oil (PSO) is threatening to 
cut off their fuel supplies.  Ashraf acknowledged that this was an 
issue which needed to be addressed. (Comment: AES has chronic 
payment issues with WAPDA.  Due to the WAPDA arrears and late 
payments, AES is unable to purchase oil from PSO in a timely manner 
and thus only has one day of gas supply on hand at AES power plants. 
 Often they are forced to shut down the plants because of 
insufficient fuel, further contributing to Pakistan's blackouts. 
PSO has now threatened to cease distribution of fuel to AES due to 
payment irregularities which result from WAPDA's delayed payments. 
AES headquarters in Virginia is concerned with the increasing amount 
of debt with an insolvent government. End Comment.) 
 
-------------------------- 
COMMENT AND ACTION REQUEST 
-------------------------- 
 
¶11. (SBU) Comment:  The GOP sees that the current 4000 MW shortfall 
in energy needs are a critical issue facing Pakistan and future 
economic growth.  The new government seems committed to making the 
tough decisions which will be necessary to plan and invest in major 
energy infrastructure projects but is also facing a severe cash 
crunch which could impede upon such plans.  Post will continue to 
work with all the GOP agencies involved in planning this upcoming 
Energy Investment Conference and report on needed Washington support 
septel.  End Comment. 
 
¶12. (SBU) Action Request. Post requests assistance in providing 
resources on coal development to the GOP.  Post also requests that 
SCA and EEB discuss the possibility of funding a feasibility study 
on the Thar coal fields with USTDA. End Action Request. 
 
PATTERSON