VZCZCXYZ0007
PP RUEHWEB

DE RUEHDM #0855/01 3441323
ZNR UUUUU ZZH
P 101323Z DEC 09
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC PRIORITY 7103
INFO RUEHLO/AMEMBASSY LONDON PRIORITY 0810
RUEHFR/AMEMBASSY PARIS PRIORITY 0765
RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0091
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY

UNCLAS DAMASCUS 000855 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ELA, NEA/FO, EEB/EX, EEB/ESC/TFS, L/EB; 
COMMERCE FOR BIS/SONDERMAN/CHRISTINO 
NSC FOR SHAPIRO/MCDERMOTT 
TREASURY FOR HAJJAR/CURTIN 
PARIS FOR NOBLES 
LONDON FOR LORD 
 
E.O. 12958: N/A 
TAGS: ECIN ECON EINV PGOV PREL SY
SUBJECT: SYRIA SEEKING MARKET QUALITY SOLUTIONS AT FIXED 
PRICES TO SOLVE ELECTRICITY SHORTAGES 
 
------- 
Summary 
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¶1. (SBU) Deputy Minister of Electricity Hisham Mashfej 
reviewed with us Syria's significant power generation 
problems and his ministry's continuing efforts to cobble 
together short-term solutions.  Mashfej acknowledged 
electricity generated from renewable resources and energy 
conservation were the key to Syria's meeting increasing 
demands for electricity and for developing an infrastructure 
capable of sustaining economic expansion.  He said Syria 
needed to establish a transparent procurement process to lure 
investors for private-public partnerships in order to fund 
needed expansion in all areas of power generation.  Mashfej 
also disclosed Syria had received a $350,000 grant from the 
IAEA to finance a nuclear power plant feasibility study. End 
summary. 
 
¶2. (U) On December 7, embassy staff called on Hisham Mashfej, 
Deputy Minister of Electricity and Director General of the 
Public Establishment for Electricity Generation and 
Transmission (PEEGT) at his office in the Ministry of 
Electricity.  Munzer Ahmad, an officer from the Americas 
Department at the Syrian Ministry of Foreign Affairs also 
attended the meeting.  The meeting was apolitical in tone and 
Mr. Mashfej was cordial and candid. 
 
------------------------------------------- 
Syria Focused on Meeting Electricity Demand 
------------------------------------------- 
 
¶3. (U) Mashfej said Syria's current maximum installed 
electricity generation capability was 8,000 MW (1,500 MW of 
which is hydro-electric), with an actual average production 
capability of about 6,700 MW-7,000 MW against a peak demand 
for electricity of about 7,200 MW.  To meet this demand, 
Syria operated eleven power generation plants plus three 
hydro-electric power plants.  Because of the substantial 
infrastructure required for new power plants, the SARG was 
currently focusing on expanding existing plants and replacing 
old, inefficient turbines and with new state-of-the-art 
equipment.  Mashfej acknowledged it was inevitable the SARG 
would have to construct new plants in the future and was 
looking at building an expandable, 750 MW power generation 
plant in Dayr al-Zawr.  Mashfej said Syrian power plants ran 
on natural gas, fuel oil or dual capability natural gas/fuel 
oil. 
 
¶4. (U) Mashfej noted 12-15 percent of power generation 
capability was lost due to aging equipment, maintenance, and 
low water levels.  He explained that high summer temperatures 
decreased the efficiency of power generation plants by 
another 10-15 percent.  Hydro-electric power production was 
also an issue in summer due to decreased water levels in the 
Euphrates River.  Mashfej said up to 20 percent of Syria's 
total generated electricity came from the three 
hydro-electric plants, but these plants were only used during 
peak summer hours to supply supplemental power.  Mashfej 
admitted rolling blackouts would continue in the winter and 
summer, but said PEEGT had not established set schedules for 
these blackouts. 
 
---------------- 
Regional Sources 
---------------- 
 
¶5. (U) According to Mashfej, Syria was involved in a 
seven-country grid connection project with Lebanon, Jordan, 
Iraq, Turkey, Egypt and Libya.  He said the grid connections 
with Lebanon, Jordan, Egypt and Libya (through Egypt) were 
completed.  He added work was currently underway to connect 
Dayr al-Zawr with the Iraqi grid: this connection would 
enable Syria to connect with the Gulf States.  The Syrian and 
Turkey grids were connected but not yet synchronized, he 
said.  Mashfej asserted that Turkey was focused on its grid 
 
connection with Europe and planned to activate its grid 
connection with Syria after that project was completed (NFI). 
 According to Mashfej, Syria imported and exported 
electricity through its international grid connections and 
for the past two years had been a net exporter. 
 
--------------------------------- 
Public Utility, Private Financing 
--------------------------------- 
 
¶6. (U) Mashfej asserted the SARG intended to keep electricity 
transmission in the hands of the public sector but was 
opening up power generation to the private sector and to 
public-private partnerships (PPP).  He said a new law on 
private electricity generation was almost ready for review 
and then submission to the Parliament. 
 
¶7. (U) Mashfej acknowledged PEEGT's lack of experience in 
conducting open competition procurements was an obstacle to 
implementing PPP projects.  PEEGT had commissioned the 
International Finance Corporation (IFC) to conduct the 
procurements for the initial PPP projects and develop 
procedures for PEEGT to generate and evaluate tenders.  He 
said the goal was to ensure transparency throughout the 
procurement process.  Mashfej told us the first independent 
power project (IPP), a 250-350 MW power plant to operate on 
natural gas/fuel oil at Nasriyeh (near Damascus), had already 
been announced and that five companies applied for the 
Request for Qualification (RFQ).  Under the terms of the RFQ, 
PEEGT will be required to supply the needed fuel to operate 
the plant and to buy all the electricity generated by the 
plant.  This project will be a build-operate-transfer (BOT) 
plant with an operation period of 20-25 years. 
 
¶8. (U) Mashfej said the SARG financed most power projects in 
Syria via long-term loans from the European Investment Bank 
(EIB), the Arab Fund for Economic and Social Development 
(AFESD), the Islamic Fund, and the Abu Dhabi Fund for 
Development (ADFD).  The government used its own funds to 
cover any gaps, he said.  Mashfej cautioned that the EIB had 
rejected financing any projects deemed "harmful to the 
environment."  Japan, he added, had financed past projects 
and the Export-Import (EXIM) Bank of India provided financing 
for the Tishreen power plant expansion project managed by 
India's Baharat Heavy Electricity Limited Company (BHEL). 
Mashfej said Syria was also looking at funding opportunities 
from major equipment suppliers such as Siemens as financing 
options. 
 
¶9. (U) According to Mashfej, there was local investor 
interest in PPP projects.  The newly established 
Syrian-Qatari Investment Group was interested in establishing 
electricity generation projects; Cham Holding Company had 
formed a new joint venture, named "Marafeq," with the Kuwaiti 
al-Khurafi Group, and intended to bid on IPP projects. 
 
--------------------------------- 
Need for Renewable-Resource Power 
--------------------------------- 
 
¶10. (U) Mashfej said the SARG had an ambitious goal to use a 
combination of renewable energy and energy conservation to 
cover 27 percent of electricity demand by 2020.  By then peak 
demand for electricity in Syria would reach 12,000 MW, based 
on a seven to nine percent annual growth rate, he said. 
 
¶11. (U) PEEGT had recently announced two wind farm projects, 
one in Damascus and a second in Homs, and other projects were 
under consideration.  Companies from Turkey, Greece and Egypt 
had already requested the RFQs for the two initial projects, 
boding well for future private-sector interest.  Mashfej said 
surveys to determine production potential were underway at 
both sites with each site expected to have a capacity of 
50-100 MW.  PEEGT had 15 additional wind measurement stations 
scattered throughout Syria in search of potential future wind 
farm sites.  PEEGT was also looking for outside assistance to 
 
run the vendor selection process for these two wind farm 
projects, and Mashfej anticipated seeking World Bank 
assistance in meetings in mid-December. 
 
¶12. (U) Mashfej asserted solar energy was another strategic 
solution for overcoming Syria's electricity shortfalls. 
Mashfej said joint venture Solaric, owned 30 percent by 
PEEGT, 40 percent by the Ministry of Industry and 30 percent 
by a Ukrainian company which will provide the technology, 
would produce photovoltaic cells.  Solaric expected to begin 
cell production during the first quarter of 2010.  Mashfej 
explained Solaric would produce solar panels for use by the 
SARG to establish its own solar power production facilities 
and for sale to private industry for commercial use and PPP 
projects.  Solaric would also focus on the production of 
solar water heaters. 
 
------------------------------- 
Nuclear Power Feasibility Study 
------------------------------- 
 
¶13. (U) When asked about the SARG's plans for the use of 
atomic energy, Mashfej told us the IAEA had given Syria a 
$350,000 grant to finance a nuclear power plant feasibility 
study.  Indicating concern about nuclear power, Mashfej 
opined that costs and safety issues outweighed the benefits 
of this method of power generation, in spite of the 
large-scale use of nuclear power in countries like France. 
 
------------------------------- 
Private Power Generation Plants 
------------------------------- 
 
¶14. (U) According to Mashfej, some large manufacturers were 
now considering establishing their own power generation 
plants to supply their facilities, and the SARG planned to 
buy their surplus power.  He would not estimate the price of 
buying the surplus, but commented the private sector sought a 
20 percent profit margin.  Higher costs would adversely 
affect Syria's ability to provide electricity at subsidized 
prices, he said.  Prior to entering any agreements, Mashfej 
planned first to consult with other, especially neighboring, 
countries on their experiences with private electricity 
producers.  Mashfej said he presently had no clear vision 
about the future relationship between PEEGT and the private 
sector in terms of purchasing privately produced electricity, 
but was carefully studying this alternative. 
 
------------------------------------- 
Ministry of Electricity Restructuring 
------------------------------------- 
 
¶15. (U) Mashfej said a new electricity law being drafted 
would, among other thing, restructure the Ministry of 
Electricity and create two new departments at the PEEGT: a 
Public-Private Partnerships Department and a Renewable Energy 
Department.  The staff for these two departments was 
currently receiving training in Jordan.  In the future, PEEGT 
would sell electricity to the Public Establishment for 
Electricity Distribution and Transmission (PEEDT) at cost and 
PEEDT would then sell electricity to consumers at the 
established subsidized price.  This would allow the SARG to 
keep the subsidy limited to one entity (the PEEDT) to help 
control the cost of the subsidies.  Mashfej told us PEEGT 
employed 11,000 people but the total number of people 
employed by the Ministry of Electricity was about 40,000.  He 
complained that over-employment and a shortage of skilled 
labor within the ministry were a problem. 
 
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Comment 
------- 
 
¶16. (SBU) Although it took a month to arrange the meeting 
with the Deputy Minister by dipnote, our initial exchange was 
notable for its positive and candid tone.  Mashfej pulled no 
 
punches in presenting the challenges facing Syria.  Rolling 
blackouts remain an everyday occurrence during times of peak 
demand in winter and summer, and shortfalls in electricity 
generation will grow to as much as 1,800 MW by 2012. 
Ambitious power generation expansion plans and forays into 
solar and wind power production can only be achieved with a 
large influx of foreign investment via private-public 
partnerships.  Public discontent with unreliable electricity 
supplies, coupled with a strong opposition to paying higher 
prices for power in the future, leave Syria's electric 
utility authorities in a dilemma that can be managed, but 
probably within constraints that will make power generation a 
continuing challenge. 
HUNTER