VZCZCXRO0887
RR RUEHROV
DE RUEHDJ #1290/01 2881407
ZNR UUUUU ZZH
R 151406Z OCT 09
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 0923
INFO IGAD COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 DJIBOUTI 001290 
 
SENSITIVE 
SIPDIS 
STATE FOR AF/E, OES, AND E/EEB 
ADDIS ABABA FOR REGIONAL ENVIRONMENT OFFICER 
STATE PASS MILLENNIUM CHALLENGE CORPORATION 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EINV BEXP SENV DJ
SUBJECT: PROGRESS ON PRIVATE INVESTMENT IN WIND, SOLAR DESALINATION 
 
REF: 09 DJIBOUTI 337; 09 DJIBOUTI 655 
 
¶1. (SBU) This message contains business proprietary information. 
Please handle accordingly. 
 
 
 
¶2. (SBU) SUMMARY.  Maple Renewable Resources Corporation (MRRC) is 
working with the GODJ to develop an estimated USD 216 million worth 
of wind energy and solar desalination projects (ref A).  While MRRC 
is not/not a U.S.-registered company, the planned projects will 
likely include significant U.S. components, with desalination 
technology to be provided by General Electric.  MRRC is currently 
working with the African Development Bank (AfDB), the World Bank's 
International Finance Corporation (IFC), and private equity 
investors to secure project financing.  The first planned project, 
a solar-powered water desalination plant, is slated to begin 
production in early 2010.  In total, MRRC is projecting eventual 
production of up to 100,000 cubic meters of desalinated water per 
day and 200 MW of wind-generated electricity, although initial 
outputs will be much lower.  Price and availability of energy and 
water remain central constraints to Djibouti's further economic 
growth, and the MRRC partnership highlights the GODJ's commitment 
to working with investors-including private investors-to develop 
the country's considerable renewable energy resources.  END 
SUMMARY. 
 
 
 
¶3. (SBU) Ambassador met October 12 with MRRC's Vice President and 
Chief Operating Officer Nick Shakesby.  MRRC's Djibouti-registered 
affiliate, Maple Indian Ocean Resources (MIOR), signed agreements 
with the GODJ in March to begin development of an initial 40 MW 
wind farm at the bay of Ghoubet near Lac Assal, and a water 
desalination plant outside of Djibouti City.  Both projects are 
joint ventures with the GODJ, which holds a 10 percent "carried" 
stake.  MIOR signed a power purchase agreement (PPA) with the 
national electricity parastatal EDD (Electricity of Djibouti) and a 
water off-take agreement with the Djibouti National Water and 
Sanitation Office (ONEAD). 
 
 
 
------------------------ 
 
PROJECT SCOPE 
 
------------------------ 
 
 
 
¶4. (SBU) MIOR is initially planning to install 40 MW of wind 
capacity at the Ghoubet site.  This initial phase could include 
from 20-40 wind turbines, depending on the model chosen.  Shakesby 
told Ambassador that General Electric was among the bidders to 
provide wind turbines.  The French company Vergnet was another 
bidder, Shakesby said, and offered turbines which could be lowered 
to the ground for maintenance, thus avoiding the need to bring a 
crane into the Ghoubet's difficult, volcanic terrain.  The wind 
project would also require a 58 km transmission line from the 
Ghoubet to Djibouti's power grid. 
 
 
 
¶5. (SBU) MIOR's planned desalination plant at the village of Douda, 
just outside of Djibouti City, is slated to begin with 12,000 cubic 
meters/day of water production.  The plant will gradually escalate 
up to 52,000 cubic meters/day and add reverse osmosis technology, 
to be supplied by General Electric.  The plant will require an 
estimated 8 MW of electricity, which will be provided through a 
combination of Concentrated Solar Power and conventional power. 
Sea water for production will be collected from wells dug on the 
beach rather than from a jetty, which will lower costs as sand 
provides an initial natural filtration.  The Douda site is located 
near Djibouti's only dump, and in the future, Shakesby said, MIOR 
is interested in waste management and utilization, although for the 
moment, Djibouti simply "does not produce enough trash." 
 
 
 
------------------- 
 
DJIBOUTI 00001290  002 OF 003 
 
 
FINANCING 
 
------------------ 
 
 
 
¶6. (SBU) MRRC is seeking financing, Shakesby told Ambassador, 
through a combination of multilateral institutions and private 
equity investors.  Sixty percent of the project is to be 
debt-financed, with 40 percent equity.  Shakesby said that MRRC is 
already in advanced discussions with the AfDB and the IFC, and has 
secured about USD 25 million in private equity, mostly through 
U.K.-based investors.  The AfDB has pledged 60 million in credit, 
and wants the rest to be financed through a syndicate.  While some 
MRRC materials listed total projected costs at USD 216 million, 
Shakesby told Ambassador that the total was likely to be between 
USD 237 and 240 million.  MRRC will also seek either Multilateral 
Investment Guarantee Agency (MIGA) or International Development 
Association (IDA) guarantees.  MRRC will also seek partnerships 
with commercial banks such as Standard Chartered or BNP Paribas, 
Shakesby said.  Equity investors will be paid back during the first 
seven years of the project, and MIOR's off-take and PPA agreements 
with the GODJ reflect this sliding scale, with higher costs 
upfront.  While MIOR is separate from MRRC, Shakesby told 
Ambassador, MRRC will have the option to purchase MIOR's projects 
if they become profitable.  MRRC is registered in the British 
Virgin Islands. 
 
 
 
------------------- 
 
NEXT STEPS 
 
------------------- 
 
 
 
¶7. (SBU) Shakesby told Ambassador that some hiccups with a local 
partner were on their way to being resolved.  To receive 
multilateral financing, MIOR will need to change its structure to 
add a board of directors.  As financing moves forward, investors 
will begin travelling to Djibouti to perform due diligence. 
Another six months of wind studies were required for the Ghoubet 
project, Shakesby said, although initial results indicated that 
Djibouti has the "best measured wind in the world" at 49 percent, 
meaning that wind turbines would be active nearly half an average 
day, much higher than the approximately 33 percent values that are 
typical for the industry.  In addition, MIOR wanted to put more 
people on the ground, and had recognized that frequent face-to-face 
communication with GODJ interlocutors was crucial for the success 
of the project. 
 
 
 
¶8. (SBU) Shakesby said that MIOR also wanted to organize outreach 
events in schools and other venues to educate the Djiboutian public 
on the benefits of renewable energy.  "Renewables are a long term 
investment," he said.  While the electricity price MIOR could offer 
was very attractive when oil prices were high, as oil prices drop 
it might initially be less competitive.  Shakesby also said that 
GODJ investments in efficient water and electricity distribution 
systems were key-MIOR would be interested in continuing to grow 
production, but could not do so if there were no adequate, 
efficient, and low-loss mechanisms to deliver water and power to 
consumers. 
 
 
 
---------------- 
 
COMMENT 
 
---------------- 
 
 
 
¶9. (SBU) Shakesby said that MRRC had initially arrived in Djibouti 
with ideas of building a luxury hotel, but quickly changed tracks 
when they recognized the unmet and growing demand for available and 
inexpensive water and power.  GODJ officials and business leaders 
all agree that finding solutions to these two constraints is a top 
priority, and President Guelleh and his government have made clear 
 
DJIBOUTI 00001290  003 OF 003 
 
 
that developing renewable sources will be central to the GODJ 
energy strategy.  Post will continue to monitor this project as it 
develops, especially in light of possibly significant involvement 
of U.S. suppliers.  END COMMENT. 
SWAN