33 Companies Compete for Iraqi Power Plants

As we predicted in our report last week, Iraq's acting Electricity Minister, Hussain al-Shahristani, asked investors on Saturday to compete to build four new power plants to help the country meet it increasing electricity demands.

According to Bloomberg, the Minister promised a healthy profit for the winners.

At a meeting of 33 local and international investors, the Minister the companies that governmental and legal obstacles would be removed for firms that won the right to build and operate the plants.

"I can assure you that the government is interested in implementing these projects and will fully cooperate with the winners," al-Shahristani said.

He also urged the firms to look past Iraq's dangers and focus on the potential payoffs.

"It is true that you could hear about some sabotage attacks in Iraq and some laws that could discourage the investors, but you have to look to the potential of this country," al-Shahristani said.

Over 20 of the 33 firms at the meeting on Saturday bought the bidding data package.

At issue are plans for Iraq to give investors 22 gas fired turbines that the government has already purchased from General Electric, in exchange for building, maintaining and operating power plants. The electricity would then be sold to the Iraqi government to distribute across the country.

Billions of dollars have been spent to rebuild Iraq's electricity network, which was damaged by U.S. shelling during the 1991 Gulf War, the 2003 invasion, subsequent looting and insurgent attacks. The national power grid, however, is still unable to provide more than seven hours of daily power in Baghdad alone. Other areas across Iraq get even less electricity.

The planned power plants, to be built in four southern provinces, will add 2,750 megawatts to Iraq's current production of about 7,000 megawatts daily — about half of the actual demand.

Ten of the turbines will be installed in Basra province, with an additional four each in Diwaniya, Muthanna and Maysan provinces. Each turbine is expected to produce 125 megawatts daily.

Iraq projects it will produce 13,000 megawatts daily by 2014, said Adel Hameed Mahdi, an adviser to al-Shahristani.

Fuel for the planned facilities will come from nearby oil and gas fields that are being developed by international energy companies, Mahdi said. He said it will take two years to build the plants.

The deadline to submit proposals is mid-January, and the contracts will be awarded in May.

Encouraged by Iraq's improved security and new laws to make foreign investment easier, several firms said they were interested.

"The security situation is much better than it was maybe two or three years ago," said Steve Doughty, energy director at UK-based Harlow International, a development and engineering firm that will bid for the project. "At the moment we don't have any real worries."

But Reuters reports that some of the potential investors said the bidding process was poorly organised and that contract terms would not encourage bidders. "There needs to be a lot done yet on the government side to fix the process and make it feasible for the investors," said Alexander Krakovsky, a vice president of New York-based ContourGlobal.

Iraq also is hoping to sign a multibillion-dollar deal with Shell and Japan's Mitsubishi in southern oil fields to help boost power generation.

(Source: Bloomberg, Reuters)

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