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Cablegate: Gom Denies Rumors of Future Electricity Shortages

VZCZCXYZ0011
RR RUEHWEB

DE RUEHRB #0681/01 1081823
ZNR UUUUU ZZH
R 181823Z APR 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 6347
INFO RUEHAS/AMEMBASSY ALGIERS 4384
RUEHMD/AMEMBASSY MADRID 5696
RUEHCL/AMCONSUL CASABLANCA 2930
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS RABAT 000681

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECIN EIND ENRG MO
SUBJECT: GOM DENIES RUMORS OF FUTURE ELECTRICITY SHORTAGES

Sensitive but unclassified -- protect accordingly.

1. (SBU) Summary. Ministry of Energy (MOE) officials deny
recent press allegations, appearing in the "L'Economiste"
newspaper and attributed to National Electricity Office (ONE)
sources, that Morocco will face a shortage of electricity
starting in 2008. They concede that demand for electricity
in Morocco is rising rapidly, up an average of eight percent
annually since 2002, a rate they expect to continue as a
result of rapid infrastructure development, rural
electrification programs and strong economic growth. They
insist, however, that sufficient generating capacity will
come on line in the next few years to meet the increase in
demand, and that in any case Morocco can also import
electricity from either Spain or Algeria at attractive rates.
Ministry sources attribute the "L'Economiste" article, in
which anonymous ONE sources blamed the government for failing
to plan to build sufficient new plants, to the new Director
at ONE who feels he inherited a bad situation at the electric
utility. End summary.

2. (U) The business daily L'Economiste recently alleged that
an electricity crisis looms on the horizon for Morocco and
could result in power shortages by 2008. The report cited
anonymous officials in ONE as its source. Other papers
subsequently picked up the story, and pointed to ONE's
failure to issue an official denial as implicit confirmation
of its accuracy. Questions were subsequently directed to the
government, with papers reporting that Prime Minister Jettou
had convoked Minister of Energy Boutaleb and ordered him to
review the situation.

3. (SBU) In a meeting we sought to pursue the issue, the
MOE's Director for Electricity and Renewable Energy,
Abderrahim El Hafidi, told Econoff that the press reports
were exaggerated. He argued that the GOM had the situation
well in hand and that while electricity demand could climb
close to the limit of supply in 2008, it would not exceed it.
He suggested that the new Directorof ONE had leaked the
story in an effort to show that he had inherited a bad
situation at the electric utility, so that if problems
occurred in future he would not be held responsible. He
confirmed that the Prime Minister had convoked the Minister
of Energy to explain the situation and the Minister in turn
called El Hafidi for the details. El Hafidi said both
ministers were now comfortable with the country's electrical
output situation, notwithstanding ONE's apparent decision
last month to cancel a planned coal-burning generating
station at Cap Ghir in Southern Morocco, which would have
come on line in 2011 and provided 1,320 MW of power. (Note:
The plant had generated strong opposition from regional
lawmakers out of concern about its environmental impact,
particularly given planned tourist developments nearby. End
Note.)

4. (SBU) El Hafidi indicated that Morocco's electrical
consumption has increased eight percent per year since 2002
and should rise 8.1 percent in 2007 to 23,975 GWh, an
increase of 47.8 percent since 2002. Still, he said the
country has excess capacity in the form of a 50 MW diesel
turbine and several fuel oil powered turbines totaling 615
MW. He added that since fuel oil is expensive, it was
usually more practical for ONE to import electricity from
Spain via the countries' interconnected electrical grids --
developed to help avoid potential energy shortages. If peak
electrical use requires more power than Spain, or Algeria,
Morocco's other interconnected electrical grid partner, can
supply, the fuel oil burning turbines can be activated. El
Hafidi said he had recently met with Spanish officials who
confirmed that Spain had abundant capacity to export
electricity to Morocco.

5. (SBU) Currently, Morocco's produces 59 percent of its
electricity from coal, 12 percent from fuel oil, 11.5 percent
from natural gas, 5.5 percent from renewable energy (mostly
hydraulic), and 3 percent from pumping stations. Nine
percent is imported from Spain. The GOM foresees spending
over $1.1 billion per year over the next five years on new
electricity generating plants, and will need to increase
capacity by 400 MW per year just to keep up with demand. In
the next few years, the GOM expects to put into service the
following power plants:
2007 - 60 MW wind plant in Essaouira,
2008 - 100 MW gas turbine in Tan Tan,
2009 - 140 MW wind plant in Tangier
- upgrading the current 230 MW gas turbine to 450
MW in Ain Beni Mathar
- 300 MW gas/fuel oil turbine in Mohammedia
In addition, the GOM plans to replicate an existing 1,320 MW
coal burning plant located in El Jadida that currently
produces 50 percent of the country's electricity. The new
plant was originally planned for Cap Ghir, but we recently
confirmed press reports that ONE has now abandoned that plan.
It will seek a new location and may also seek to co-locate
the facility with the existing plant in El Jadida.

6. (SBU) The GOM has also liberalized laws for private
companies that produce electricity. The new rules raise the
ceiling level of production for producers from 10 MW to 50
MW. Several oil exploration companies in Morocco report the
strong possibility of making natural gas finds that might be
too small to be commercially viable, but could instead be
used to power small gas powered turbines for producing
electricity that ONE would buy and transmit. The MOE and ONE
have energy conservation programs (septel) that could have an
immediate impact on the demand for electricity. For the
long-term, the GOM is considering nuclear power as an
alternative source of energy. ONE has invited non-binding
offers from several foreign companies, including Westinghouse.

7. (SBU) Comment. Morocco's non-farm GDP growth has been
strong for several years as has the level of new foreign
investment into industry. The GOM is actively promoting the
expansion of the country's tourism sector, infrastructure, as
well as conducting ambitious rural electrification programs.
The rate of rural household electrification has increased
from 55 percent in 2002 to 88 percent in 2006. Combined,
these factors have led to rapid growth in the demand for
electricity that is likely to continue for several years.
Post will continue to monitor this situation and the
apparently rocky relationship between the MOE and ONE. End
Comment.
******************************************
Visit Embassy Rabat's Classified Website;
http://www.state.sgov.gov/p/nea/rabat
******************************************

RILEY

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