VZCZCXRO8211
RR RUEHLMC
DE RUEHMU #1753/01 2011246
ZNR UUUUU ZZH
R 201246Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0837
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC 0851
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 001753 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR WHA/CEN, WHA/EPSC, AND EEB 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: ENRG ECON PGOV NU
SUBJECT: ENERGY CRISIS FORCES GOVERNMENT TO CUT WORK WEEK 
 
REF: 06 MANAGUA 2051 
 
¶1. (U) Summary: Nicaraguan President Daniel Ortega has mandated a 
shortened workday for all executive branch offices in Managua in 
accordance with a recent agreement establishing a nation-wide 
blackout schedule.  The agreement signed by the Nicaraguan Energy 
Institute (INE) and Spanish-owned energy distributor Union Fenosa 
guarantees power to the capital city from 7 AM and 2 PM.  All other 
departments will experience blackouts during these hours.  Ortega 
and other GON officials have publicly stressed that new generating 
capacity will be installed shortly and that rationing is a temporary 
measure.  The bulk of the anticipated capacity will not become 
operational until early 2008, however.  While the shortened 
government work week and scheduled blackouts reduce the chaos 
brought on by this crisis, its impact on economic activity remains 
significant.  End summary. 
 
Deal or No Deal 
--------------- 

¶2. (U) On July 5, President Ortega announced a decree mandating a 
shortened workday for all executive branch offices in Managua.  The 
decree is intended to better manage the country's ongoing energy 
shortage, which has seemingly random blackouts of up to 12 hours a 
day throughout the country in recent weeks.  INE President David 
Castillo proposed the reduced working hours in a letter to Ortega on 
July 4. 
 
¶3. (U) On July 10, government officials accused Fenosa of failing to 
adhere to the agreed-upon blackout schedule and demanded a new 
arrangement, which was signed on July 12.  According to this 
agreement, all departments outside Managua will lose power Monday 
through Friday from 7 AM to 2 PM.  Within Managua, power will be cut 
from 2 - 6 PM for some areas and from 5 - 10 PM for others, on 
alternating weeks.  The arrangement was designed so that no 
commercial sector would face outages of more than five hours in 
duration, at least within the capital city.  Fenosa will establish a 
weekend blackout schedule, but thanks to lower energy demand on 
those days outages will not be as severe. 
 
The New Government Work Day - Earlier and Shorter 
--------------------------------------------- ---- 

¶4. (U) According to the new arrangement, all executive branch 
institutions in Managua will be open Monday through Friday from 7 AM 
to 1 PM, with the exception of hospitals, health clinics, and 
selected educational facilities.  While Ortega lacks the authority 
to mandate reduced hours for non-executive GON offices, he has 
called upon the legislative and judicial branches, as well as all 
independent institutions, to follow his lead.  According to Ortega, 
he and other GON representatives have been in close consultation 
with members of the private sector and have agreed that it would be 
preferable to guarantee power in Managua during the morning hours. 
GON officials also announced that they have requested that the 
International Monetary Fund (IMF) analyze the Nicaraguan electricity 
sector to better understand the blackouts and their causes. 
 
Help On the Horizon 
------------------- 

¶5. (U) On July 5, Castillo claimed the blackout schedule would 
continue only until August while generator units that provide a 
total of 60 MW are repaired.  Yet according to Nicaraguan Chamber of 
Commerce President Jose Adan Aguerri, the country's energy crisis 
will not be fully resolved until new power generation plants are 
installed in the coming months.  The Nicaraguan power sector has an 
installed generation capacity of around 700MW, but is currently 
generating just 450MW, far less than average peak demand of about 
600MW. 
 
¶6. (U) With the backing of Ortega, the National Assembly passed a 
bill on June 28 approving the purchase of another 120 megawatts of 
generators, 60 of which have been secured from a French company and 
60 of which remain unprocured.  An additional 60 megawatts from 
Venezuela and 30 megawatts from Taiwan, all bunker/diesel based, are 
expected to become operational in the first trimester of 2008.  On 
July 17, press reports announced that Florida Light and Power and 
Ashmore Energy (remnant of Enron's generating arm) are considering 
making offers as well.  Florida Light and Power has proposed a 150MW 
plant that would burn bunker fuel, while Ashmore is considering a 
450MW liquefied coal plant.  According to Ortega, Nicaragua is also 
pursuing long-term hydroelectric, biomass, geothermal, wind, and 
solar energy projects. 
 
Ortega's Message - The Private Sector Cheats 
-------------------------------------------- 

¶7. (U) In recent press comments, Ortega confirmed that the GON will 
continue subsidizing private energy use up to 150KW/month (about 60% 
of consumers), but warned that individuals who consume above this 
amount will have to pay accordingly.  Ortega blamed the private 
sector for the current energy shortage, claiming that many large 
consumers and businesses have been obtaining energy through illicit 
hook-ups or simple non-payment of utility bills.  He encouraged the 
National Assembly to pass a law cracking down on such practices. 
 
Comment 
------- 

¶8. (SBU) The blackout schedule is a welcome measure for businesses 
who have suffered large losses due to the unpredictable nature of 
the power supply in recent weeks.  Nevertheless, it is extremely 
difficult to run a government and grow an economy with daily 
five-hour blackouts, and even Ortega has acknowledged that this 
arrangement is nothing more than a short-term measure designed to 
address the symptoms of a much larger and long-term ailment. 
 
TRIVELLI