VZCZCXRO4219
RR RUEHROV
DE RUEHDJ #0655/01 1601300
ZNR UUUUU ZZH
R 091302Z JUN 09
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 0491
INFO IGAD COLLECTIVE
RUEHDJ/AMEMBASSY DJIBOUTI
RUEHRK/AMEMBASSY REYKJAVIK 0001

UNCLAS SECTION 01 OF 03 DJIBOUTI 000655 
 
SENSITIVE 
SIPDIS 
DEPARTMENT FOR AF/E AND OES 
ADDIS ABABA FOR REO 
 
E.O. 12958: N/A 
TAGS: ENRG ECON PREL SENV SOCI IC ET DJ
SUBJECT: DJIBOUTI: MIXED PROGRESS TOWARD RENEWABLE SOLUTIONS FOR 
INCREASING ENERGY NEEDS 
 
REF: 08 DJIBOUTI 859; 09 DJIBOUTI 337; 09 DJIBOUTI 164 
 
¶1.  (SBU) SUMMARY.  Djibouti continues to struggle with a widening 
gap between electricity demand from consumers, and a constrained 
supply of expensive, diesel-generated electricity provided by the 
national electricity company.  Realizing that improved supplies of 
lower-cost energy are imperative to maintain economic momentum and 
meet the basic needs of ordinary Djiboutians, the GODJ has 
partnered with a variety of bilateral and corporate partners 
(including at least one U.S. company) to begin developing 
Djibouti's considerable renewable energy resources.  Senior GODJ 
energy officials recently expressed optimism about Djibouti's 
future potential as an energy producer, but some frustration about 
possible financing gaps and bilateral misunderstandings impacting 
the largest renewable project currently on tap: a planned 50-100 
megawatt Djibouti-Iceland geothermal plant at Lac Assal.  END 
SUMMARY. 
 
 
 
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SUMMER SHORTAGES CONTINUE; OVERALL DEMAND GROWS 
 
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¶2. (SBU) In a May 27 meeting with Ambassador, Minister of Energy 
Moussa Bouh Odowa and his Secretary-General Farah Ali Ainan 
stressed the urgency of finding solutions to Djibouti's current and 
projected energy shortfalls.  Djibouti's parastatal electricity 
monopoly EDD (Electricity of Djibouti) has an installed capacity of 
100 megawatts (MW), Secretary-General Ainan said.  However, EDD's 
realistic production capacity is much lower-closer to 47 MW.  EDD 
is capable of sustaining a short-term "surge" in production to 
60-70 MW, but not for prolonged periods.  Current summertime demand 
(when Djibouti's hot season leads to greater air conditioner use 
and a peak in energy demand) is now at 87 MW, leaving a significant 
gap between production and consumption needs.  Furthermore, Ainan 
underlined, the Ministry of Energy projects that by 2010, 
Djibouti's energy needs will reach 125 MW--or even higher if 
Djibouti continues to attract large-scale foreign direct investment 
projects. 
 
 
 
¶3. (SBU) Before tackling these large, long-term projected needs, 
Ainan said, the Ministry first needed to address Djibouti's 
immediate shortfall, which he estimated at 25 MW.  (NOTE.  For 
several weeks in late May, Djibouti City experienced multiple, 
prolonged power cuts of up to 9 hours a day.  EDD had announced the 
unusually severe cuts in advance, after one of its main generators 
failed.  By the end of May, one faulty generator had reportedly 
been repaired, and power supply improved throughout the city. 
However, as in every summer, Djiboutians still grapple with 
frequent power cuts.  END NOTE.)  While Djibouti had been hoping 
that the planned Djibouti-Ethiopia electricity interconnection (ref 
A) would be part of the solution to Djibouti's energy woes, 
Minister Odowa said that recent delays in the project construction, 
along with reports of drought-related power shortages in Ethiopia, 
were worrisome to Djibouti. 
 
 
 
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ICELAND-DJIBOUTI GEOTHERMAL PROJECT 
 
--------------------------------------------- ------- 
 
 
 
¶4. (SBU) In 2008, the GODJ signed several agreements with Iceland 
to begin feasibility studies for Djibouti's most ambitious planned 
renewable energy project to date, a projected 50-100 MW geothermal 
plant at Lac Assal (ref A).  During the financial crisis, Iceland 
had reportedly assured Djibouti that the money set aside for the 
Lac Assal project had been safely sequestered.  Recently, however, 
Minister Odowa said that he was not as confident that Iceland had 
 
DJIBOUTI 00000655  002 OF 003 
 
 
the full USD 25-30 million available to fund the project 
feasibility phase.  (NOTE. Reykjavik Energy Invest (REI) signed 
agreements in 2008 with the International Finance Corporation's 
InfraVentures fund, which agreed to cover 35% of the Djibouti 
project's exploration costs, up to a contribution ceiling of USD 4 
million.  END NOTE.) 
 
 
 
¶5. (SBU) The GODJ still remains committed to the Lac Assal project, 
Minister Odowa told Regional Environmental Officer (REO) during a 
June 4 meeting, and would potentially be able to finance any 
funding gap for the feasibility phase from its own resources.  If 
this happened, Odowa said that the GODJ would then want to adjust 
the terms of the Iceland-Djibouti agreements accordingly, to 
reflect the GODJ's greater initial investment.  Beyond questions of 
finance, Odowa told Ambassador that Iceland-which currently has no 
permanent representation on the ground in Djibouti-had somewhat 
irritated the bilateral relationship through a few errors of 
protocol and communication.  Nevertheless, Odowa said that the 
feasibility phase was on track to begin this autumn, with Reykjavik 
Energy Invest (REI) working "this week" on the bidding process for 
companies competing to drill the three planned test wells. 
 
 
 
¶6. (SBU) In addition to its collaboration with Iceland, Odowa said 
that Djibouti remained interested in working with a wide variety of 
partners.  (NOTE.  The GODJ recently signed an agreement with the 
U.S. firm Maple Indian Ocean Resources (ref B) to develop wind and 
solar resources, and is reportedly working with an Indian firm 
interested in exploiting geothermal energy at Lac Abbe, on 
Djibouti's border with Ethiopia.  END NOTE.)  Ambassador noted that 
other American firms-including Geothermal Development Associates 
(GDA), which worked with the U.S. Trade and Development Agency 
(USTDA) in 1999 on a geothermal feasibility study at Lac 
Assal-might well be interested in geothermal and other energy 
projects in Djibouti. 
 
 
 
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GODJ CITES CAPACITY CHALLENGES 
 
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¶7. (SBU) Now that Djibouti has several energy projects on the 
horizon, Secretary-General Ainan told REO, the next major challenge 
will be developing an effective regulatory framework to respond to 
Djibouti's new, diversified energy environment.  (NOTE.  Post has 
previously submitted a proposal to host an Embassy Science Fellow 
(ref C) with expertise in energy policy.  END NOTE).  Minister 
Odowa said that now, oil and gas companies interested in Djibouti's 
offshore and onshore potential were "pushing" the GODJ to allow 
exploration.  Before negotiating with such companies, he said, the 
GODJ would like to have much better baseline data on Djibouti's 
realistic potential, and eventually, assistance in negotiation. 
Without proper baseline data, Odowa said that the GODJ feared that 
it would not be able to negotiate fair deals, and asked whether the 
USG might be able to fund assistance for such data studies. 
 
 
 
¶8. (SBU) COMMENT.  Djibouti's basic diplomatic strategy leans 
toward welcoming all comers and skillfully balancing a range of 
friends and allies.  It is therefore no surprise that in the field 
of renewable energy development, Djibouti has encouraged courtship 
from a full range of potential partners.  As one long-time GODJ 
energy official told EmbOffs, Djibouti wants to "keep a lot of 
options on the shelf," ready to implement when the time is right. 
Ideally, Djibouti would also like prospective investors to foot 
much or most of the bill for costly-and relatively 
risky-feasibility studies to evaluate potential projects.  As 
Djibouti's renewable resources look more and more lucrative, the 
GODJ may well succeed in negotiating these kinds of arrangements. 
However, as its own energy needs become daily more acute, the GODJ 
may also become more willing to put up what capital it 
can-alongside its contribution of the raw resource-in order to 
assure that projects come to timely fruition.  Post will continue 
to monitor the status of renewable energy projects in Djibouti, 
especially in light of potential opportunities for U.S. business 
 
DJIBOUTI 00000655  003 OF 003 
 
 
involvement.  END COMMENT. 
SWAN