VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #0727/01 2750936
ZNR UUUUU ZZH
P 020936Z OCT 09
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 6836
INFO RUCNMGH/MAGHREB COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS TUNIS 000727 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HAYES, NARDI) 
STATE PLEASE PASS TO OPIC (BRERETON) 
USDOC FOR ITA/MAC/ONE (MASON), 
CASABLANCA FOR FCS (KITSON) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EINV ETRD TS
SUBJECT: PROSPECTS FOR THE OPIC-SUPPORTED RENEWABLE ENERGY 
INVESTMENT FUND IN TUNISIA 
 
REF: STATE 95170 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY. 
 
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Summary 
------- 
 
¶1. (SBU) Although Tunisia's current energy picture hardly 
includes renewables, growing unmet domestic demand and an 
agreement signed with Italy to provide power via an undersea 
cable present opportunities in this sector.  A handful of 
Tunisian government agencies deal with renewables, among them 
the Societe Tunisienne de l'Electricite et du Gaz (STEG), the 
utility holding a monopoly on management of the power grid. 
Unfortunately, STEG has been reluctant to allow private power 
generation in the past, although investors are optimistic 
STEG is loosening and renewables are in Tunisia's future. 
Although some Government of Tunisia (GOT) public financing is 
available for renewable energy projects, the need for capital 
for mega-projects is present.  American companies face 
competition from European counterparts, who come to the table 
with preferential financing offers and government-backed 
loans.  Overall, Tunisia is a viable market for renewables in 
the medium- to long-term.  End summary. 
 
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The Renewable Energy Sector in Tunisia 
-------------------------------------- 
 
¶2. (SBU) Currently, less than one percent of Tunisia's energy 
comes from renewable sources.  However, growing domestic 
demand (upwards of five percent per year, according to an 
industry leader), coupled with a signed agreement to provide 
energy to the EU via an undersea cable to Italy (which is yet 
to be built), make the Tunisian market one to watch.  The GOT 
is committed to investing in renewable energy in part to wane 
its dependency on Algerian and Libyan gas and oil, but also 
for environmental reasons.  The sharp increase in fossil fuel 
prices in 2008 pushed the GOT to enact energy-saving measures 
and invest in renewables.  Tunisia has suffered slight energy 
deficits since 1994, but is looking to renewables to supply 
some of its needs for housing and small industry.  According 
to the GOT, Tunisia will have 215MW of new wind power by 2011 
and raise national energy consumption from renewables to 13 
percent of total production by 2011. 
 
------------------------------------------ 
Government Entities Involved in Renewables 
------------------------------------------ 
 
¶3. (SBU) Renewable energy in Tunisia is managed by three 
government entitites:  the General Directorate of Energy 
(DGE), which belongs to the Ministry of Industry, Energy, and 
Small and Medium Enterprises (MOIE); the National Agency for 
Energy Conservation (ANME), also under the MOIE and known 
also as the National Agency for Renewable Energy; and the 
Syndicate of Renewable Energy (a chamber group).  Another 
important player is STEG, the state-owned utility, as they 
have monopoly control over the power grid in Tunisia.  STEG, 
historically, has been reticent to allow private power 
generation and remains an obstacle in fully liberalizing the 
sector. 
 
---------------------------- 
Opportunities on the Horizon 
---------------------------- 
 
¶4. (SBU) A 2008 agreement between TERNA, the Italian utility 
company, and STEG calls for the construction of a 120MW 
independent power production plant, called ElMed, which will 
supply both Europe (800MW) and the domestic market (400MW). 
The energy to Europe will be supplied via an undersea cable, 
which is estimated by industry experts to be operative no 
earlier than 2013.  The tender for the power plant will 
likely be announced by the end of 2009 (the tender for the 
cable has not been announced.)  According to the MOIE, the 
plant's energy source (coal, natural gas or renewables) will 
be decided by the market.  However, in a March 2009 
statement, the MOIE said 200MW of capacity would be reserved 
for renewable sources.  Another large project, called 
Desertec (a trans-Saharan solar energy network), though still 
in the planning stages, could also offer opportunities for 
solar energy providers. 
 
 
-------------------------------------- 
Foreign Investment in Renewable Energy 
-------------------------------------- 
 
¶5. (SBU) A number of U.S. companies are interested in 
investing in renewable energy in Tunisia, both in wind and 
solar power.  However, for the most part, they are doing so 
to position themselves for the future market created by the 
STEG-TERNA agreement.  At least one company reports there are 
still significant challenges in this sector, posed by STEG in 
particular, whose leadership has been unfriendly to foreign 
investors.  The legal framework for renewables is not optimal 
as it gives some leeway for private power to invest but does 
not spell out the terms of linkage to the network operated by 
STEG.  Investors are optimistic, however, that leadership at 
STEG will change and thus make the investment climate more 
favorable. 
 
--------------------------------------------- ------ 
Is There a Need for Capital in the Tunisian Market? 
--------------------------------------------- ------ 
 
¶6. (SBU) The GOT is willing to give financial support in the 
form of grants and loans to various energy conservation 
projects, but according to experts, they are not able to 
provide the needed capital for mega-projects.  Currently, the 
only public funds available for energy conservation, which 
includes renewables, are the National Fund for Energy 
Conservation and the Fund for Innovation and Development of 
Renewable Energy.  Both give grants and loans to renewable 
energy projects with capital financed from the International 
Monetary Fund and the World Bank.  The strongest competition 
facing U.S. firms in the renewable energy sector comes from 
Spain (wind power) and Germany (solar power).  Both countries 
are able to provide EU or national government-backed grants 
to their companies and provide favorable financing, which 
makes them attractive partners for the GOT. 
 
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The Bottom Line 
--------------- 
 
¶7. (SBU) Comment:  Tunisia's market is very promising in the 
medium- to long-term.  Demand increases both domestically and 
abroad, coupled with the opening of the legal framework for 
private power generation in 2008, have created some room for 
independent power plants and private investment of large 
industrial groups to meet this energy need.  The ElMed 
project could open up some opportunities for renewables when 
the undersea cable is built, especially if the tender for the 
power plant goes to a company that could build a hybrid 
plant.  Some challenges remain, however.  The legal framework 
is not perfect and STEG remains reluctant to allowing 
operation of private power.  Investors are optimistic, 
however, that renewable energy is in Tunisia's future.  End 
comment. 
GRAY