

Currently released so far... 12648 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
2011/05/14
2011/05/15
2011/05/16
2011/05/17
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
AORC
AF
AU
ASEC
AMGT
AS
APER
AR
AG
ARF
AJ
AA
AINF
APECO
AODE
ABLD
AMG
ATPDEA
AE
AEMR
AMED
AGAO
AFIN
AL
ASUP
ASECKFRDCVISKIRFPHUMSMIGEG
AID
ASCH
AM
AORL
ASEAN
APEC
ADM
AFSI
AFSN
ADCO
ABUD
AN
AY
AIT
AGR
ACOA
ANET
ASIG
AMCHAMS
AGMT
AADP
ADPM
ATRN
ALOW
ACS
APCS
AFFAIRS
ADANA
AECL
ACAO
AORG
AROC
AO
ACABQ
AX
AMEX
AFGHANISTAN
AZ
AND
ARM
AQ
ATFN
AMBASSADOR
ACBAQ
AC
AUC
ASEX
AER
AVERY
AGRICULTURE
AFU
BR
BTIO
BY
BO
BA
BU
BL
BN
BM
BF
BEXP
BK
BG
BB
BTIU
BBSR
BRUSSELS
BD
BIDEN
BE
BH
BILAT
BC
BX
BT
BP
BMGT
BWC
CS
CA
CH
CD
CO
CE
CU
CVIS
CASC
CJAN
CI
CPAS
CMGT
CDG
CIC
CAC
CBW
CWC
COUNTER
CW
CT
CY
CNARC
CACM
CG
CB
CM
CV
CIDA
CLINTON
CHR
COE
CR
CIS
CDC
CONS
CF
CODEL
COPUOS
CIA
CFED
CARSON
CL
CROS
CAPC
CTR
CACS
CN
CBSA
CEUDA
COM
CONDOLEEZZA
CICTE
COUNTRY
CBE
CKGR
CVR
COUNTERTERRORISM
CITEL
CLEARANCE
CARICOM
CSW
CITT
CDB
CJUS
CTM
CAN
CLMT
CBC
EAID
ECON
EFIS
ETRD
EC
ENRG
EINV
EFIN
EAGR
ETTC
ECPS
EINT
ES
EIND
EAIR
EU
EUN
EG
EPET
ELAB
EWWT
EMIN
ECIN
ESA
ER
ETRDEINVECINPGOVCS
EAIG
ET
ETRO
ELTN
EI
EN
EUR
EK
EUMEM
EPA
ENGR
EXTERNAL
EUREM
ELN
EUC
ENERG
ENIV
EZ
ERD
EFTA
ETRC
ETRN
EINVECONSENVCSJA
EEPET
EUNCH
ESENV
ENNP
ENVI
ETRDECONWTOCS
ECINECONCS
EFINECONCS
ELECTIONS
ENVR
EXIM
ERNG
ECA
EINVEFIN
ETC
EAP
ECONOMY
EINN
ECONOMIC
EXBS
ECUN
ENGY
ECONOMICS
EIAR
EINDETRD
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EAIDS
EREL
EINVETC
ECONCS
ETRA
IC
IV
IAEA
IR
IO
IT
IN
IS
IZ
IMO
IPR
IWC
ICAO
ILO
ID
ICTY
ICJ
INMARSAT
INDO
IL
IMF
IRS
IQ
IA
ICRC
IDA
IAHRC
IBRD
ISLAMISTS
IGAD
ILC
ITU
ITF
INRA
INRO
IDP
ICTR
IEFIN
IRC
ITRA
ITALY
INRB
INTELSAT
IBET
IRAQI
ISRAELI
IIP
ITPGOV
ITALIAN
INTERNAL
INTERPOL
IEA
INR
IZPREL
IRAJ
IF
ITPHUM
ISRAEL
IACI
KBTR
KPAO
KOMC
KCRM
KDEM
KHIV
KBIO
KTIA
KMDR
KNNP
KSCA
KTIP
KWMN
KIPR
KCOR
KRVC
KFRD
KPAL
KWBG
KE
KTDB
KUNR
KSPR
KJUS
KGHG
KAWC
KCFE
KGCC
KOLY
KSUM
KACT
KISL
KTFN
KFLU
KSTH
KMPI
KHDP
KS
KHLS
KMRS
KID
KN
KU
KAWK
KSAC
KCOM
KAID
KIRC
KWMNCS
KMCA
KNEI
KCRS
KPKO
KICC
KPOA
KV
KDRG
KIRF
KSEO
KVPR
KSEP
KTER
KBCT
KFIN
KGIC
KCIP
KZ
KG
KWAC
KRAD
KPRP
KTEX
KNAR
KPLS
KPAK
KSTC
KFLO
KSCI
KIDE
KOMS
KHSA
KSAF
KPWR
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KFSC
KRIM
KVRP
KENV
KNSD
KCGC
KDDG
KPRV
KTBT
KWMM
KMFO
KMOC
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KPAI
KO
KVIR
KREC
KX
KR
KCRCM
KBTS
KOCI
KGIT
KNUP
KPAONZ
KNUC
KNNPMNUC
KERG
KTLA
KCSY
KTRD
KNPP
KJUST
KCMR
KRCM
KCFC
KCHG
KREL
KFTFN
KLIG
KDEMAF
KICA
KHUM
KSEC
KPIN
KESS
KDEV
KWWMN
KOM
KWNM
KRFD
KMIG
KRGY
KIFR
MARR
MOPS
MASS
MX
MNUC
MCAP
MO
MR
MEPP
MTCRE
MAPP
MEPN
MZ
MT
ML
MA
MY
MIL
MD
MASSMNUC
MU
MK
MTCR
MUCN
MAS
MEDIA
MAR
MC
MI
MQADHAFI
MPOS
MTRE
MASC
MG
MARAD
MRCRE
MW
MP
MOPPS
MTS
MLS
MILI
MEPI
MEETINGS
MERCOSUR
MCC
MIK
MAPS
MV
MILITARY
MDC
NATO
NZ
NL
NO
NK
NU
NPT
NI
NG
NEW
NSF
NA
NPG
NSG
NE
NSSP
NS
NDP
NSC
NAFTA
NH
NV
NP
NPA
NSFO
NT
NW
NASA
NORAD
NATIONAL
NGO
NR
NIPP
NZUS
NC
NRR
NAR
NATOPREL
OEXC
OTRA
OPRC
OVIP
OAS
OIIP
OSCE
OREP
OPIC
OFDP
OMIG
ODIP
OVP
OSCI
OIC
OECD
OIE
OPDC
ON
OCII
OPAD
OBSP
OFFICIALS
OPCW
OHUM
OES
OCS
OTR
OSAC
OFDA
PGOV
PREL
PM
PHUM
PTER
PINR
PINS
PREF
PARM
PL
PK
PU
PBTS
PBIO
PHSA
PE
PO
PROP
PA
PNAT
POL
PLN
POLITICAL
PARTIES
PCUL
PAK
PGGV
PAO
PSA
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PAS
PGIV
PHUMPREL
PCI
PG
POGOV
PHUMPGOV
PEL
POLITICS
POLICY
PINL
PP
PREO
PAHO
PBT
PMIL
POV
PRL
PDOV
PTBS
PRAM
PREFA
PSI
PAIGH
POSTS
PALESTINIAN
PARMS
PROG
PTERE
PRGOV
PORG
PS
PGOF
PKFK
PSOE
PEPR
PPA
PINT
PMAR
PRELP
PINF
PNG
PFOR
PUNE
PGOVLO
PHUMBA
PSEPC
PNR
POLINT
PGOVE
PHALANAGE
PARTY
PDEM
PECON
PROV
PGOC
PY
PHUH
PF
PHUS
RU
RS
RO
RW
RP
RFE
REGION
REACTION
REPORT
ROOD
RCMP
RM
RSO
ROBERT
RICE
RSP
RF
RIGHTS
RIGHTSPOLMIL
RUPREL
RELATIONS
SENV
SU
SCUL
SOCI
SNAR
SL
SW
SMIG
SP
SY
SA
SHUM
SZ
SYRIA
SF
SR
SO
SARS
SN
SC
SIPRS
SI
SYR
SEVN
SG
SPCE
SK
STEINBERG
SH
SNARCS
SAARC
SCRS
SENVKGHG
SAN
ST
SIPDIS
SNARIZ
SNARN
SSA
SPCVIS
SOFA
SEN
SANC
SWE
SHI
TW
TU
TBIO
TSPL
TPHY
TRGY
TC
TT
TSPA
TINT
TERRORISM
TX
TR
TS
TN
TD
TH
TIP
TNGD
TI
TZ
THPY
TP
TBID
TF
TL
TV
TK
TO
TRSY
TURKEY
TFIN
TAGS
UN
UK
UNSC
UNGA
US
UNESCO
UP
UNHRC
UNAUS
USTR
UNDP
UNEP
UY
UNCHR
UG
UZ
UNPUOS
USEU
UNMIK
UNDC
UNICEF
UV
UNHCR
UNCHC
UNCSD
USOAS
UNFCYP
USUN
USNC
UNIDROIT
UNO
UNCND
USPS
USAID
UE
UNVIE
UAE
UNODC
UNCHS
UNFICYP
UNDESCO
UNC
Browse by classification
Community resources
courage is contagious
Viewing cable 06QUITO1735, LEGISLATION TO REFORM ECUADOR'S ELECTRICITY SECTOR
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06QUITO1735.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06QUITO1735 | 2006-07-17 20:07 | 2011-05-02 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Quito |
VZCZCXYZ0000
OO RUEHWEB
DE RUEHQT #1735/01 1982007
ZNR UUUUU ZZH
O 172007Z JUL 06
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4840
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 5795
RUEHCV/AMEMBASSY CARACAS PRIORITY 1871
RUEHLP/AMEMBASSY LA PAZ JUL 9954
RUEHPE/AMEMBASSY LIMA PRIORITY 0775
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 0833
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS QUITO 001735
SIPDIS
SENSITIVE
SIPDIS
DEPT FOR WHA/AND
TREASURY FOR SGOOCH
E.O. 12958: N/A
TAGS: ECON ENRG EINV
SUBJECT: LEGISLATION TO REFORM ECUADOR'S ELECTRICITY SECTOR
PRESENTED TO CONGRESS
REF: QUITO 1395
¶1. (SBU) Summary. President Palacio submitted to Congress
July 10 legislation to reform Ecuador's electricity sector
that would represent a significant advance if passed and
implemented as proposed. The legislation would make it a
crime to steal electricity, recognize almost $1 billion owed
by the GOE to power distributors, and establish government
payment guarantees for long term power purchase agreements
(PPAs). U.S. companies would benefit directly from the
acknowledgment of old debts and the ability to routinely
offset debts to Petroecuador against money owed them by power
distributors. Although not perfect, the proposed reform
would address many of the industry's problems. However,
given the repeated failure by Ecuador's Congress to approve
similar legislation over the last two years, prospects for
passage in this election year are slim. End Summary.
Current System Structurally Dysfunctional
-----------------------------------------
¶2. (U) Ecuador's electricity sector is riddled with
problems. The inability or disinterest of electricity
distributors to bill and collect from consumers underlies a
culture of non-payment that has created losses for most firms
in the sector. Many consumers, both households and
companies, steal power through clandestine connections. In
addition, the GOE sets the price distributors can charge
consumers below the price at which they purchase power. This
"tariff deficit" creates a systematic loss on the
distributors' books that they are legally unable to recover.
Compounding this burden, Petroecuador sells subsidized fuel
to power generators, thereby passing part of these losses
onto the state oil company. Distributors pay generators via
trust funds, and payment to each generator follows a pecking
order that changes on political whims several times yearly.
In practice, distributors have considerable discretion to
assign funds. Trust funds focus exclusively on current month
billing only, and any debt outstanding from prior months is
disregarded entirely.
¶3. (U) Investment into the sector is minimal. Generators
are unwilling to pour money into additional capacity when
they are unpaid. Likewise, existing incentives paradoxically
favor investment in high-cost, environmentally-unfriendly
power generation because of fuel subsidies and transfer of
accounts receivables to Petroecuador. The GOE also gives
preferential treatment to power generation in either Colombia
or Peru, because Ecuador pays them 100% in advance to meet
demand local generators cannot supply.
¶4. (SBU) Ecuadorian state entities, businesses and families
benefit from this dysfunctional system, regularly not paying
for electricity. GOE officials likely siphon off resources
in the form of direct diversions of cash or commissions from
those who receive contracts. State-owned companies control
most of the distribution, with the exception of Guayaquil,
which is served by a municipal-owned distributor, and six
state-owned generators dominate the country's electricity
generation (although private producers do generate energy at
a much lower price). The cascading tradition of non-payment
has technically bankrupted most state-owned companies
involved. Should Ecuadorian businesses suddenly be forced to
pay, the economic basis of many businesses in several
industries would be directly threatened. In the end, the GOE
pays as much as $1.5 billion annually, but the tangled web of
contracts and legal constraints leaves the true cost
difficult to define.
Electricity Sector Reform Legislation
-------------------------------------
¶5. (U) President Palacio submitted to Congress July 10
legislation to reform Ecuador's electricity sector that would
represent a significant advance if passed and implemented as
proposed. The bill was submitted as urgent and allows
Congress only 30 days to revise and vote on it or it
automatically becomes law. Legally, Congress must hold two
debates and vote before August 6. The Economic Commission
has committed to bringing the bill to the floor for the first
debate by July 18.
¶6. (U) The most important piece of the reform is the GOE's
guarantee to cover the tariff deficit and that it
specifically recognizes an accumulated deficit of up to $950
million incurred between April 1, 1999 and December 31, 2005.
The Ministry of Economy must calculate a revised deficit
taking into account several complex rules outlined in the
proposal within three months after the legislation is
approved. It creates a Ministry of Economy fund to
compensate distributors, which would open the door for more
complete payment to electricity generators. However, the
deficit guarantee is unlikely to cover all of the generators'
outstanding debt.
¶7. (U) It also permits the Ministry of Economy to guarantee
payment to power generators if the generator has participated
in a public competition and entered into long-term power
purchasing agreements (PPAs) to sell all of their production
to Fondo de Solidaridad companies for at least five years, at
a price below the predicted average annual market rate.
(Comment: State-owned electricity and telephone companies
belong to the Fondo de Solidaridad, a quasi-governmental
holding company whose subsidiaries are exempt from government
procurement rules. End comment.) In order to qualify for the
guarantee, the purchasing distributor must be certified by
the Central Bank and Ministry of Economy as "efficient".
Payments based on this guarantee would be made directly to
the company owed, without passing through the distributors'
hands. The legislation officially recognizes the outstanding
debt owed to generators for electricity provided but not paid
for in prior years; however, it does not propose a method of
paying this debt and prohibits the payment of accrued
interest on these debts.
¶8. (U) The bill also requires a series of immediate steps to
clean up and administer the Fondo's mismanaged accounts. The
Fondo would be required to hire independent management,
select board members and administrative personnel based on
relevant qualifications, and define and implement a Code of
Ethics. Finally, the bill would require Fondo power
distributors to enter into PPAs for at least 75% of the power
they purchase over the next five years.
¶9. (U) The legislation codifies the common practice of
routinely offsetting outstanding payments with Petroecuador
fuel purchases. Power generators that purchase fuel from
Petroecuador and sell power to distributors will be able to
routinely offset these accounts against one another, without
the need for a special Presidential Decree each year.
¶10. (U) The bill allows the GOE to subsidize power
consumers, but would require it to target specific social
groups and the subsidy must be formally incorporated into the
annual budget. Subsidies would be paid to the Fondo, who in
turn must credit the subsidies directly to Fondo companies.
U.S. Firms in the Sector
------------------------
¶11. (U) Two U.S. companies sell electricity to the
state-owned power distributors, Machala Power (owned by Noble
Energy) and Electroquil (Duke Energy); each is owed
approximately $50 million to date and both have filed
international arbitration proceedings to recover these
losses. Machala, the largest U.S. investor after Oxy's
expulsion, is a low-cost producer that has invested more than
$370 million in a natural gas platform, processing plant, and
an electricity generation plant (reftel). Eighty percent of
the money owed to Machala is outstanding from previous
months. Without a steady revenue stream, its headquarters in
Texas is unwilling to invest an additional $125 million to
double the plant's output. The company told us it is hopeful
the bill passes to help guarantee payment, however the
payment guarantee only for PPAs undercuts its attempts to
sell electricity on the spot market. The interest payment
exclusion also undermines Machala's international arbitration
claim exceeding $200 million in interest and other damages.
¶12. (U) Duke Energy, in contrast, has benefited from the
transfer agreement between distributors and Petroecuador, and
passed off much of its outstanding payments to Petroecuador
in exchange for fuel. It has been a big proponent of
codifying this exchange agreement into law and would benefit
from the inclusion of the provision in the final law.
Comment
-------
¶13. (SBU) Four attempts over the last two years to reform
Ecuador's power sector have failed. While the proposed law
is an imaginative step forward, it is unlikely to pass in its
present form, or be implemented as intended. Indeed,
congressional approval of such sweeping reforms in an
election year is unlikely. Several Congressmen directly
control local electricity distributors and electricity sector
unions are extremely well organized, militant, and viscerally
opposed to changing the status quo. Should the law pass as
proposed, the Ministry of Economy would certainly pay some
distributors, however the funds are unlikely to cover old
debts to generators and non-payment by Fondo companies is
likely to continue. The prospect of government guarantees
could dramatically improve the performance of U.S.
investments unless distributors collude to impose prices
below generating cost. The value of government guarantees or
of public recognition of debts is directly related to the
price of oil and inversely to corruption in the sector. In
the end, investment in Ecuador's electricity sector is
unlikely to increase in any measurable way even under the
best form of this legislation.
JEWELL