VZCZCXRO4873
PP RUEHMA RUEHPA
DE RUEHOS #0507 1981441
ZNR UUUUU ZZH
P 171441Z JUL 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC PRIORITY 9224
INFO RUEHUJA/AMEMBASSY ABUJA 9024
RUEHWR/AMEMBASSY WARSAW 0467
RUEHCD/AMCONSUL CIUDAD JUAREZ 0446
RUEHIT/AMCONSUL ISTANBUL 0445
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHDC
UNCLAS LAGOS 000507
SIPDIS
SIPDIS
SENSITIVE
DEPT PLEASE PASS TO USTR
DEPT PLEASE PASS TO JAMES WILLIAMS, OPIC
E.O. 12958: N/A
TAGS: ECON PGOV EINV PREL NI
SUBJECT: AES - UPDATE ON CONTRACT DISPUTE
REF: LAGOS 147
SENSITIVE BUT UNCLASSIFIED; HANDLE ACCORDINGLY
1. (U) Summary: On July 11, AES Nigeria Barge Ltd. (AES), a U.S.
power services company, met with President Umaru Yar'Adua to discuss
an on-going tax exemption dispute (reftel). The meeting was attended
by all stakeholders, including the Ministry of Finance and Energy,
Federal Inland Revenue Service (FIRS) and the Power Holding Company
of Nigeria (PHCN). AES perceived the meeting as a breakthrough after
months of impasse and looming escalation. End summary.
--------------------------------------------- -------
A Focused And Objective Meeting May Yield Resolution
--------------------------------------------- -------
2. (U) On July 11, Hassaan Mirza, Chief Financial Officer and Ahmer
Nadeem, Managing Director, AES Nigeria Barge Ltd. (AES), a U.S.
power services company, met with President Umaru Yar'Adua to discuss
an on-going tax exemption dispute (reftel). The meeting was attended
by all stakeholders, including Vice President Jonathan Goodluck,
Secretary to the Federation, Babagana Kingibe, Special Advisor to
SIPDIS
the President on Power, Joseph Makoju, and representatives of the
Ministry of Finance and Energy, Federal Inland Revenue Service
(FIRS), and the Power Holding Company of Nigeria (PHCN).
3. (U) After a presentation on the tax dispute issue, Nadeem
appealed to Yar'Adua to intervene in order to avoid arbitration.
Makoju expressed satisfaction with the Power Purchase Agreement
(PPA) Amendment already negotiated, and faulted the Ministry of
Finance for the delay in its implementation since June 2006.
4. (U) President Yar'Adua asked questions aimed at ascertaining the
validity of the PPA, AES' legal position, Lagos State's involvement,
and the likely outcome of arbitration. The Solicitor General
conceded that arbitration would likely be unfavorable for the GON.
5. (U) Some officials were dissatisfied at what they perceived as
the "one-sided" nature of the contract, noted Mirza. Yar'Adua,
however, was focused on understanding the facts of the case and
instructed those complaining to put aside their feelings as to the
contract being unfair, as the 'contract had been entered into'.
6. (U) President Yar'Adua asked whether AES was still agreeable to
the PPA Amendment, which Mirza and Nadeem confirmed. Since the
meeting, Mirza said Yar'Adua constituted a committee, headed by
Makoju and instructed to report to the President directly, to deal
with the issue.
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Comment
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7. (SBU) Post has been following this issue closely over the past
few months, and we are encouraged by President Yar'Adua's objective
and pragmatic approach to this matter. This may signal not only
resolution in this particular case, but, more broadly, increased
transparency and respect for contractual obligations by the
government. End comment.