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Cablegate: Island Power's Gas Supply Contract Cancelled;

VZCZCXRO7650
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #1892 2850625
ZNR UUUUU ZZH
R 120625Z OCT 07
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 4230
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SINGAPORE 001892

SIPDIS

SENSITIVE
SIPDIS

STATE PASS TO USTR FOR AUSTR WEISEL AND DAUSTR BELL

E.O. 12958: N/A
TAGS: ENRG EPET EINV ETRD ECON IN SN
SUBJECT: ISLAND POWER'S GAS SUPPLY CONTRACT CANCELLED;
SINGAPORE PROJECT ON HOLD

REF: A. SINGAPORE 1669

B. SINGAPORE 1167
C. SINGAPORE 996
D. SINGAPORE 1833

1. (SBU) The Government of Indonesia on October 8 cancelled
its gas supply contract with Island Power, a Singapore-based
subsidiary of U.S. company Intergen, according to an Island
Power representative. The representative told us that that
the decision was not entirely unexpected and that it
effectively ended Island Power's plan to construct a power
plant in Singapore (Ref A). The GOI cited Island Power's
inability to gain access to a pipeline that would carry the
gas from Indonesia to Singapore as the reason behind its
decision. The GOI reportedly informed Island Power that it
would not reenter negotiations until the company could
guarantee pipeline access.

2. (SBU) Island Power has waged a complicated, five year
battle to gain access to the gas pipeline, which is owned by
a Singapore government-linked company (Ref B). The USG
raised the case during the FTA review in May and during AUSTR
Doug Bell's visit in September (Refs C and D). A June
amendment to Singapore's Gas Act that empowers the Energy
Market Authority (EMA) to open pipeline access seemed to give
Island Power new hope. However, a decision on the company's
June application to EMA is still not in sight. Island Power
now expects the EMA to void its application at any time due
to the cancelled contract, according to the representative.
With this in mind, his company has already drafted an appeal
to the Minister for Trade and Industry.

3. (SBU) Comment: Island Power is now caught in a catch-22
involving the GOI and EMA and seems ready to accept the loss
of the US$70 million it has invested in the project so far.
Island Power acknowledges that EMA has followed the letter of
the law in processing the first application under the newly
amended Act. However, it appears EMA's cautious pace has
doomed Island Power's ambitions to become the first
non-government-linked player in Singapore's electricity
market. If Island Power ultimately fails to gain pipeline
access, it will raise questions about how seriously the GOS
takes its stated commitment to liberalize its electricity
market. End comment.

Visit Embassy Singapore's Classified website:
http://www.state.sgov.gov/p/eap/singapore/ind ex.cfm
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