VZCZCXYZ0008
RR RUEHWEB

DE RUEHWN #0346/01 1612113
ZNY CCCCC ZZH
R 102113Z JUN 09
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC 7478
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1933
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL

C O N F I D E N T I A L BRIDGETOWN 000346 
 
SIPDIS 
 
E.O. 12958: DECL: 06/08/2019 
TAGS: ENRG PREL EINV KTBD IR XL
SUBJECT: GEOTHERMAL ENERGY ON EVERYONE'S FRONT BURNER IN 
ST. KITTS AND NEVIS 
 
Classified By: Charge d'Affaires, a.i. D. Brent Hardt, reasons 1.4 (b). 
 
 
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Summary 
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¶1. (C) Having been granted rights to develop a geothermal 
reservoir by the Government of Nevis, West Indies Power 
claims it is 18 months away from generating sufficient power 
to meet the energy needs of Nevis, and more than 2 years away 
from exporting power to St. Kitts.  Large potential customers 
on St. Kitts, including the American-owned Christophe Harbour 
development project and the St. Kitts Marriott, strongly 
support the geothermal project due to expected energy cost 
savings, and are lobbying the Government of St. Kitts and 
Nevis in favor the project.  However, potential profits from 
the project are threatening to further undermine the already 
shaky relationship between St. Kitts (which sees the project 
as a federal resource) and Nevis (which classifies it as a 
national Nevisian resource). 
 
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Geothermal Power by 2010 
------------------------ 
 
¶2. (C) Poloffs recently met with executives of West Indies 
Power (WIP) in St. Kitts and Nevis and discussed the progress 
of the geothermal energy project.  During a tour of the 
geothermal sites, WIP representatives showcased three 
completed test wells and the future site of the first power 
generation station.  All the wells have been drilled to a 
satisfactory depth, and results on all are promising, company 
officials said.  One of the three test wells exceeded 
expectations and actually spews an abundance of high pressure 
steam.  The WIP drilling manager estimated that in 18 months 
the site will be producing sufficient power to cover the 
island of Nevis' needs.  There are further plans to run an 
undersea HVAC transmission cable, at a cost of US$10 million, 
across the narrows between the islands of St. Kitts and Nevis 
and to begin supplying power to St. Kitts by late 2011. 
Nevis spent US$22 million on diesel fuel for power generation 
in 2008, and, at a cost of 42-45 cents per kilowatt hour, 
consumers in St. Kitts and Nevis currently pay one of the 
highest prices for electricity in the world.  WIP officials 
believe that when the geothermal-generated electricity comes 
online, they will be able to cut that price in half. 
 
¶3. (C) WIP told us that they have negotiated a-25 year 
concession to develop the geothermal reservoir -- a deal that 
requires WIP to pay the Nevis government a 5 percent royalty 
of all gross profits from the sale of any electricity.  WIP 
executives are extremely optimistic about the capacity of the 
reservoir and now estimate they will be able to generate 
approximately 300 megawatts of electricity when the resource 
is fully developed, further increasing their drive to craft 
an export market for the sale of electrical power (Nevis' 
needs stand at approximately 10 megawatts, leaving 
substantial excess capacity).  The island in the region with 
the most need for power is Puerto Rico, over 400 kilometers 
away, and a transmission cable to Puerto Rico will cost 
roughly half a billion dollars.  The islands of St. Martin 
and Antigua are closer, and could also benefit. 
 
--------------------------------------------- ---- 
Key Business Players on St. Kitts Want Geothermal 
--------------------------------------------- ---- 
 
¶4. (C) Executives from the large Christophe Harbour (CH) 
development project on the southern peninsula of the island 
of St. Kitts have a keen interest in the geothermal energy 
potential from Nevis.  CH, an enormous project including a 
golf course, marina, residential properties and hotels, will 
require more electricity just for the development than the 
current capacity on St. Kitts.  The island of Nevis is 
located only three kilometers across the narrows, and this 
proximity makes the laying of an electrical transmission 
cable across the narrows convenient for CH.  Without the 
geothermal energy from Nevis, CH will have to construct its 
own diesel power generation plant on site and a cost of tens 
of millions dollars.  CH executives would prefer to use the 
clean geothermal electricity both to keep the environment 
around their massive investment clean and to use as a 
marketing tool to prospective customers who take the 
environment into account.  In a similar vein, the sprawling 
Marriott resort complex on St. Kitts has expressed a strong 
interest in tapping into geothermal-derived energy to lower 
its energy bill and reduce reliance on private generators. 
 
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Who Owns the Geothermal Resource? 
--------------------------------- 
 
¶5. (C) The CEO of the Christophe Harbour project did express 
concerns over what he saw as a growing animosity between the 
islands of St. Kitts and Nevis over the ownership of the 
geothermal resource, and how this animosity may interfere 
with the laying of the transmission cable.  The government of 
Nevis sees the geothermal reservoir as a resource of Nevis, 
while the federal government of St. Kitts and Nevis sees it 
as a federal resource belonging to both islands.  The Nevis 
Island Administration has already given permission to WIP to 
lay the transmission cable across their half of the narrows, 
however the GOSKN, at this point has not.  The head of WIP on 
Nevis did not seem overly concerned that GOSKN would hold up 
the laying of the cable to spite the island of Nevis.  In 
fact, local press reported some months ago that St. Kitts had 
already agreed to purchase power form Nevis.  Given the 
symbiotic relationship between the two that would be 
necessary for any geothermal project to be sustainable, it 
seems unlikely that the issue would irreparably damage the 
relationship between St. Kitts and Nevis. 
 
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Comment 
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¶6. (C) The constitution of St. Kitts and Nevis allows for the 
island of Nevis to leave the federation whenever the citizens 
choose, and the prospect of a commercially viable energy 
export is reviving talk in some Nevis circles on 
independence.  A referendum must be passed in a general vote 
by two-thirds majority in order for Nevis to split away, 
though, and while referenda are held on an irregular basis, a 
two-thirds majority (out of 5,000 citizens) has never 
threatened.  Should the project come to fruition, St. Kitts 
currently has the only realistic customers for Nevis power in 
the short term.  Even the most optimistic plans of running a 
line to Puerto Rico would likely require using St. Kitts as a 
transit point (allowing them to charge transmission fees 
overland).  Thus, while clean energy development could very 
well produce political sparks in the short term, the 
objective technical and economic realities are that St. Kitts 
and Nevis need each other to make geothermal commercially 
viable, and will ultimately have to craft a modus vivendi. 
HARDT