Lounsbury: Delayed, so: On Iraq, Steel, Projects & CPA

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March 28, 2004

Delayed, so: On Iraq, Steel, Projects & CPA

Well, my man is dropping off his daughters (bloody family men...) so a moment regarding my conversation last night with a fellow working with CPA (sub-contract, indirect) regarding the opportunity. I've known him a while now, we have off the record convos, bit of checking in on each other.

First, he knows the folks who got whacked by the Iraqi police. As many of you know, the whackers were 100 percent bona fide Iraqi police. Added information on this, from my amigo, was they (the whackees) had made a stupid move of travelling late in the evening without a convoy or heavily armed escort. In Iraq, you do not go out after dark unless you're armed to the teeth and in armor. That's the rule. They, my amigo says, had a bit too much naive belief in "good work." Good work means nada in a guerilla war.

Harsh criticism from him - and he knew the folks - but a clear statement on the reality.

Second, commended my decision to go for the Morocco option, saying, "It's not getting any better anytime soon." Noted the briefings now are explicitely warning people coming in for contract work that even in conditions where you are armed and armored, you're looking at a good 10 percent chance, 2 out of 20, that you are going to get whacked. This is not happy stuff, he is not sure how much longer he can keep at it himself. Further, in his opinion, there are signs of the instability spreading. Hard to tell, but it is there. We agreed that for the Steel project to come off we're going to have to site it in the South. There's noother choice. The Kurdish areas are presently stable, but siting in the North runs a real risk that if Kurd/non-Kurd tensions go overboard - and there are signs of this already - a project sited in the North may end up cut off from the rest of the country.

South Central region might b e a choice, but question is can you relaibly get enough power off-take given sabotage, etc. Note, this is a serious concern, you can't make money on this thing if the bloody thing is down half the time from the power getting cut. Or in the alternative, you hve to build your own power plant to go with your project. It might have an added benefit in terms of co-gen and then off-sales to the grid for excess power, but that's a real gamble.

I had not really thought through the power issue before, so this was a useful convo.

The other issue raised of course was cost of security. Going rate for average security people, no great shakes, is now $1000/day. That is a serious bit of added overhead. Westerners of course, but the IRaqis can not be trusted. There is just not enough bandwidth to properly vet everyone, indeed in the choas, it is well nigh impossible to properly vet people. Of course, you can go the old fashioned way of depending on a "family" to set up something, but then you get into a shadowy set of circumstances. Avoidable? Don't know.

In any case, he noted that right now they are desperate for private activity to come in, because in general, except for Arab trading operations, there is no investment going on that is not driven by CPA itself. Almost everything is the ministries. This should get us leverage. But is it enough to get the kind of coverage that we need to make this work? I don't know, because the cost structure keeps looking more and more distroted. So far I have not had the sense the private sector investment team is realistic enough regarding what they can actually get happening in the prsent circumstances. Sucked down too much of that home brew called "Iraq is a startup opportunity" that they were pimping back last year.

March 28, 2004

Delayed, so: On Iraq, Steel, Projects & CPA

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