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Cablegate: Kunduz Dairy Factory Looks for Buyer

VZCZCXYZ7021
RR RUEHWEB

DE RUEHBUL #0566 0651000
ZNR UUUUU ZZH
R 051000Z MAR 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 3132
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/OSD WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC//JF/UNMA//
RHMFIUU/HQ USCENTCOM MACDILL AFB FL

UNCLAS KABUL 000566

SIPDIS

DEPARTMENT FOR SCA/FO, SCA/A, S/CRS, EUR/RPM
NSC FOR WOOD
OSD FOR SHIVERS
CENTCOM FOR CG CJTF-82, POLAD

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL ECON AF
SUBJECT: KUNDUZ DAIRY FACTORY LOOKS FOR BUYER


1. (SBU) Summary: The Kunduz dairy factory, the largest example of
private investment in the city since the fall of the Taliban, is
contemplating a sale to a local investor. The USD 8 million factory
has never been used due to high input costs, low market price for
dairy products and limited demand.

2. (SBU) The Mountain Pastures Dairy Company is a Kazakh/American
joint venture (75-25) with an approximate USD 8 million initial
investment. Mountain Pastures's CEO, Liliana Cazacu, and COO, Marat
Yessemov, are based in Almaty, Kazakhstan, but visit Kunduz
regularly. The factory has a yearly capacity of 20,000 tons of
re-hydrated milk or juice from concentrate (apple, cherry, mango and
orange).

3. (SBU) The state of the art equipment and Kunduz-branded beverage
containers have never been used. Production is uneconomical based
both on costs of dried milk and the current market price of milk and
juice. Cazacu noted that it was more profitable to sell dried milk
then re-hydrate it and package and sell as processed. Demand and
total market size is also limited. The lack of reliable power
supply requires an expensive independent generator solution.

4. (SBU) The factory's management is looking for an exit strategy
and is currently in discussions with three potential Afghan buyers
for the factory. Cazacu suggested that it may be used for fresh
milk or bottled water. She told us in a recent factory visit that a
sale is likely within the next six months. An Afghan owner who
focuses on fresh milk collection, has lower overhead due to absence
of international staff, and brings local expertise (the previous
leadership team rarely left the factory and had a poor understanding
of the Afghan economic situation) may be able to find a way to make
the factory profitable.

5. (SBU) The factory may be sold before even turning its lights on.
Hopefully, an investor can find an economical utilization for the
facility and create employment. Any investor will need to perform
due diligence to honestly assess the size of market and product
pricing. With the factory's location on the main road between
Kunduz and the Afghan-Tajik bridge, the next owner may be able to
exploit easier access to new Tajik markets. OPIC is currently
looking at the possibility of financing U.S. investment in the
plant. We anticipate follow up on that process in April.

WOOD

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