U.S. consulting firm offers strengths on Cuban side
With great pleasure we share this article from Cuba Standard, a specialized media on business and economic news, regarding Cuba Strategies Inc.
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U.S. consulting firm offers strengths on Cuban side
(Cuba Standard, Vol 24 NO. 11)
U.S. companies are beginning to contemplate renewable-energy projects in Cuba, executives with a little-known Miami-based consultancy have moved into the spotlight recently.
Three-year old Cuba Strategies Inc. (CSI) dedicates itself to providing consultancy services to international entities intent on investing in Cuba’s emerging renewable-energy sector. Unlike other U.S.-based Cuba trade consultants, whose real expertise has been within the U.S. legal realm, the Cuba Strategies team — consisting of a mix of MBAs, attorneys and entrepreneurs — is relevant to prospective investors because of its ties to the Cuban government and state entities, as well as its knowledge of Cuba’s arcane legal system.
“We have no influence on the Cuban government approval process, but because of our experience and knowledge on how it works, we can advise our clients on how to engage appropriately and improve their chances,” said Guennady Rodríguez, CSI’s Chief Business Officer. “Cuba is a very particular market, and they are starting to engage with U.S. companies within a very complex relation with the U.S. government. It is critical to understand this context, the key people, both in the political and technical arenas, the required communication style, the institutions involved and others that may be influencing, and the overall priorities of the Cuban side.”
CSI’s Chief Strategy Consultant, Carlos Fernández-Aballí Altamirano, a Cuba-born entrepreneur and academic, wields an engineering background that includes studies at the Instituto Superior Politécnico José Antonio Echeverría/ISPJAE near Havana, and the University of Bristol in Great Britain. Team member Rodríguez, MBA, participated in the first MBA program organized by the Father Félix Varela Cultural Center of the Archdiocese of Havana, and was also an adjunct professor at the University of Havana’s law school. Cuba Strategies’ other team members, including CEO Juan Espinosa also happen to have legal backgrounds in the United States.
Cuba has put out close to $2 billion worth of renewable-energy projects for bidding by foreign investors. One joint venture that has begun earthmoving —thanks to Chinese funding— is a 62-mw biomass power plant connected to the Ciro Redondo sugar mill by Scottish entrepreneur Andrew Macdonald; operations are scheduled to start in 2019. Another UK firm, Hive Energy, said it was awarded a 50-mw photovoltaic solar farm within the Mariel Special Economic Development Zone, with 100% foreign ownership.
However, as became evident at an Energy & Infrastructure Summit in Havana in September, U.S. renewable-energy companies remain on the sidelines of these developments, hampered by U.S. sanctions and lack of funding.
Cuban and U.S. officials met for the first time to exchange views about renewable energy projects as recently as Dec. 14 in Washington (see page 17). The “U.S.-Cuba Renewable Energy and Energy Efficiency Working Group” agreed on a meeting framework “for future collaboration”, but whether the incoming Trump administration will continue the working group is unknown.
“I think that investors will wait to see a clearer path of what the new administration is going to do,” Rodríguez said. “At this moment, companies that have been talking with Cuban institutions will try to accelerate the approval process to have everything ready before Jan. 20,” he added, referring to the date of Donald Trump’s inauguration.
“For companies like CSI, the current uncertainty about the future of Cuba-U.S. relations would be negative, because businesspeople will be more cautious in assuming any risk; on the other side, it may be an opportunity to work with those who understand that, eventually, commercial relations will go forward at full speed, because the incentives are so high, economic, political and humanitarian, that no particular interest group will be able to withhold it for too long.”
According to Rodríguez, General Electric is so far the only U.S. company in talks with Cuba about a renewable-energy project. GE is reportedly on the verge of signing an agreement related to a small hydroelectric plant in Matanzas province.
GE would not comment.
CSI is “currently in talks with a U.S. company regarding a renewable energy project in Cuba,” Rodríguez said, declining to share details.
In the meantime, CSI helped organize a Duke University case competition, inviting students from Carnegie Mellon University, Columbia University, and Yale University, among others, to find innovative ways to address Cuba’s energy challenges. The winner will earn prize money and a trip to Havana in late May 2017 to take part in the International Renewable Energy Conference/CIER.
U.S. companies interested in renewable-energy projects, like any other foreign investor, must first visit with state utility Union Eléctrica (UNE) and sign the appropriate paperwork to get information to participate in the “request for proposals” process. Typically, UNE offers 20-year projects based on a Power Purchase Agreement (PPA) that have been pre-approved by the Cuban government, after a careful review and feasibility studies. Approval, of course, depends on the deal bidders offer UNE.
“Cubans are looking for a mix of experience, technology and who can offer the best price for the energy,” Rodríguez said.
These procedures are not always simple — U.S. visitors will need business visas for the first meetings in Havana, for instance — and nuances matter in the proposals, he said.
How can U.S. companies invest in clean energy?
Legal experts who specialize in U.S. sanctions programs say that U.S. companies can apply for a license to conduct business in Cuba.
Aki Bayz, an attorney with Morrison & Foerster LLP in Washington, suggested at an Americas Society forum in October on Cuba’s renewable energy plans that a carefully-crafted license application to the Office of Foreign Assets Control (OFAC) can be effective.
“You have to be able to tell a good story – how is this consistent with U.S. government policy?” he said.
A convincing argument can be made that a U.S. company’s energy activities in Cuba is consistent with Obama’s “Support for the Cuban People” policy, according to Bayz.
“You want to make the case as to how this would be beneficial to the Cuban people. Putting solar panels on everybody’s roof is something that the U.S. government would be able to say ‘that seems to be for the mutual benefit of the Cuban people.’ If you want to build a plant to furnish the military barracks, that’s not.”
That said, engaging with elements of the Cuban economy that are controlled by the military is possible, Bayz suggests.
“One can argue, ‘Yes, this industry may be controlled by the military, but we’re doing a good thing — this is consistent with the policy of authorizing travel and it will help the Cuban people,’” he said. “If you can make the case affirmatively, even signing an agreement with an entity otherwise prohibited is something that OFAC can approve.”
Bayz cautioned that while obtaining OFAC approval is one thing, getting financing is another.
“U.S. banks are very skittish about doing anything involving dollars in a sanctioned country,” he said. “For financing purposes, having that specific authorization and a license would be appropriate in order to give banks assurance that it is covered, rather than trying to convince a bank it’s ‘ordinarily incident’ to this. Having specific authorization would definitely help in terms of financing.”
He added that gathering support from the U.S. State Department or the Department of Energy “would be appropriate”.