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Viewing cable 02TEGUCIGALPA3479, ADVOCACY CASE: GOVERNMENT TURNAROUND LEADS TO AES

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Reference ID Created Released Classification Origin
02TEGUCIGALPA3479 2002-12-30 21:28 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tegucigalpa
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS TEGUCIGALPA 003479 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA, WHA/CEN, AND EB/CBA 
GUATEMALA FOR COMATT: DTHOMPSON 
 
E.O. 12958: N/A 
TAGS: ENRG EINV ECON EAID BEXP PREL KJUS HO
SUBJECT: ADVOCACY CASE: GOVERNMENT TURNAROUND LEADS TO AES 
CONTRACT FOR 200 MW STARTING IN THREE YEARS 
 
REF: a) 01 TEGUCIGALPA 2872 
 
     b) TEGUCIGALPA 02207 
     c) TEGUCIGALPA 02857 
     d) TEGUCIGALPA 03184 
     e) TEGUCIGALPA 3273 
     f) TEGUCIGALPA 3416 
 
1. (SBU) Summary.  AES Honduras signed a contract on 
December 27 with the state-owned electricity company ENEE to 
provide 200 MW of electricity starting within three years. 
The deal came after the ENEE Board of Directors annulled the 
tender award to Lufussa on December 19.  In an emergency 
meeting on December 20, the Council of Ministers authorized 
the ENEE to sign direct purchase agreements for a total of 
410 MW with the companies who made the best offers based on 
price and quality.  Lufussa also reportedly signed a 210 MW 
contract earlier in the week.  Embassy wished to thank 
Washington agencies for their strong support during this 
hard-fought advocacy effort.  End summary. 
 
2. (SBU) AES' local representative reported that on December 
27 AES Honduras signed a deal with the state-owned 
electricity company ENEE for 200 MW.  AES chose to begin 
providing electricity within 36 months, allowing it to 
operate the plant with natural gas from the beginning.  The 
ENEE refused to consider standard clauses used in 
international financing with multilaterals like the 
International Finance Corporation or the Interamerican 
Development Bank.  The local AES representative reported 
that despite the omission of the standard clauses, the 
contract provides enough flexibility to complete the USD 600 
million investment.  Honduran energy company Lufussa also 
signed a contract for 210 MW with 24 months COD earlier in 
the week.  We understand that the contracts would go to the 
National Congress for approval on January 27. 
 
3. (SBU) The deals came after the Council of Ministers held 
an emergency meeting on December 20, a day after the ENEE 
Board of Directors unanimously agreed to annul the public 
tender for the 210 MW electricity contract, to discuss what 
to do about the bid.  The ENEE Board annulled the bid over 
concerns that the legal challenges to the decision to award 
the 210 MW contract to Lufussa would tie up the bid contract 
in the courts for years, impede the creation of new capacity 
and ultimately lead to a potential national energy crisis in 
2004 (ref's e & f).  The government has not acknowledged any 
flaws in the tender process. 
 
4. (U) Following the meeting, the Council of Ministers sent 
instructions to the ENEE to arrange direct contracts for the 
original 210 MW contemplated in the bid and an additional 
200 MW for demand growth.  Minister of the Presidency Luis 
Cosenza announced to the press that the contracts would be 
signed with the bidders who made the best offers, based on 
quality and price, in the original public tender. 
 
5. (SBU) Embassy would like to thank Washington agencies for 
their support throughout.  Advocacy by then Assistant 
Secretary of WHA Otto Reich, Commerce Secretary Donald Evans 
 
SIPDIS 
and Under Secretary for Economic Affairs Alan Larson, all 
expressing their interest in a fair and transparent bid 
process, were especially helpful. 
 
Palmer