VZCZCXYZ0001
PP RUEHWEB

DE RUEHEG #0862/01 1380856
ZNR UUUUU ZZH
P 180856Z MAY 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 2450
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 000862 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ENRG ECON ETRD PREL EG
SUBJECT: EGYPT EXCLUDES BECHTEL'S TENDER OFFER TO HELP 
BUILD EGYPT'S FIRST NUCLEAR POWER PLANT 
 
REF: CAIRO 00025 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE ACCORDINGLY. 
 
 
¶1. (SBU) KEY POINTS: 
 
--Bechtel's tender offer to provide consultancy in developing 
Egypt's first nuclear power plant has been excluded by the 
Ministry of Electricity and Energy (MoEE). 
 
--The Ambassador met with Bechtel and Minister of Electricity 
and Energy Hassan Younes to voice our concerns and to seek an 
explanation of the GOE's decision. Younes said Bechtel 
repeatedly refused to comply with the tender agreement. 
 
--Egypt's Nuclear Power Plant Administration (NPPA) has begun 
pre-contract negotiations with the Australian firm 
WorleyParsons.  According to WorleyParsons' regional manager, 
WorleyParsons is traded on the Australian stock exchange but 
an acquisition of a U.S. firm made WorleyParsons over 40% 
U.S.-owned.  NPPA expects negotiations to be completed within 
a few weeks. 
 
--It is unclear whether Bechtel will seek further USG 
advocacy on this issue. 
 
¶2. (SBU) COMMENT:  It appears to us that the GOE was 
genuinely interested in working with Bechtel on this project 
and was disappointed that an agreement could not be reached. 
During our discussions with Bechtel, it seems that Bechtel 
feels that they may have overplayed their hand during the 
pre-contract negotiation process and that their negotiating 
tactics were not as effective as they intended.  In order to 
manage the fallout, Bechtel plans to write to the MoEE and 
NPPA to express Bechtel's regrets over the outcome and convey 
their strong desire to work with the GOE on future projects. 
The negative outcome of this case may prove costly in terms 
of future nuclear energy projects in the Middle East.  U.S. 
businesses that might have otherwise been included in later 
phases of this project had Bechtel won, may now be excluded 
in favor of international firms.  According to Rames Khalil, 
the Regional Power Manager at WorleyParsons responsible for 
Egypt and Africa, WorleyParsons plans to have large U.S. 
content in the project, including employing U.S. engineers to 
build local capacity and transfer technology to the Egyptian 
side. END COMMENT. 
 
¶3. (SBU) BECHTEL UNABLE TO CLOSE THE DEAL:  In December 2008, 
the Egyptian Nuclear Power Plants Authority (NPPA), part of 
the Ministry of Electricity and Energy, awarded Bechtel Power 
Corporation a 10-year contract worth $188 million to consult 
on and help design Egypt's first nuclear power plant 
(reftel).  A committee formed from different government 
agencies selected Bechtel over seven other corporations. 
Bechtel would be charged with evaluating and selecting from 
different nuclear energy technologies on the international 
market, choosing sites for reactors, and applying 
international safety standards.  Bechtel would also prepare 
the way for a separate tender for the construction of the 
power plant.  Another American bidder, Sargent & Lundy (S&L), 
did not submit a formal advocacy form to the U.S. Department 
of Commerce requesting USG assistance.  Consequently, 
Commerce's Advocacy Center elected to support Bechtel 
exclusively. 
 
¶4. (SBU) During the negotiation phase, one of the main points 
of contention between Bechtel and the GOE was the issue of 
nuclear insurance liability.  Bechtel originally wanted 
limited liability, whereas the GOE wanted no ceiling on 
liability.  Both sides agreed on a "sub cap," which is a 
civil liability that would equal the total bid amount (in 
this case approximately $200 million).  This issue was 
eventually resolved by Bechtel agreeing to NPPA's requests. 
Over the past months, during which repeated back and forth 
negotiations took place, Bechtel finalized the tender 
agreement with NPPA by meeting the requirements as set forth 
by NPPA. 
 
¶5. (SBU) On April 29, Bechtel received a letter from the NPPA 
stating that their proposal was not compliant with the tender 
document and therefore excluded.  In a letter in response to 
NPPA, Bechtel outlined their disappointment and disagreement 
with the NPPA's decision since Bechtel was ranked as the 
number one bidder in both technical and cost terms and was 
invited to begin contract negotiations.  The letter states 
Bechtel's responses to five issues raised by the NPPA and 
notes Bechtel's agreement to NPPA's wishes.  The Australian 
firm WorleyParsons (which has 24 offices with 6,000 personnel 
 
in the United States, with its U.S. headquarters in Houston) 
has been invited to begin contract negotiations with NPPA to 
provide the consulting services to help build Egypt's nuclear 
power plant.  According to press reports, Parsons and the 
NPPA are expected to reach an agreement in the upcoming weeks. 
 
¶6. (SBU) After the Ambassador raised the issue with National 
Democratic Party Assistant Secretary General and Presidential 
son Gamal Mubarak, Minister of Electricity and Energy Hassan 
Younes asked to meet the Ambassador on May 6.  Minister 
Younes explained that throughout the four months of 
pre-contract negotiations, Bechtel had repeatedly refused to 
comply with the terms of the tender agreement.  Bechtel was 
notified of the GOE's decision to exclude Bechtel on April 11 
and was given until April 28 to appeal.  Bechtel sent their 
appeal in a letter dated May 1, and did not seek USG 
assistance until April 29.  By that point it appears that the 
GOE had firmly decided to move on with negotiations with the 
second place finisher, WorleyParsons.  Parsons has been 
invited to enter tender negotiations and the GOE expects an 
agreement to be reached within the next few days.  We will be 
in contact with Bechtel to see if they require further USG 
advocacy on this issue. 
SCOBEY