Private power producers who built plants with loans from the National Development Fund of Iran (the sovereign wealth fund), are unable to repay their debts, managing director of Iran’s Thermal Power Plants Holding Company said.
“Private sector electricity producers owe $5 billion to NDFI and they cannot settle their debt not only due to the unprecedented volatility in the currency market over the last six years but also because of unclear laws,” Bargh News also quoted Mohsen Tarztalab as saying.
Following the government’s appeals in 2014 to private firms to play a bigger role in the power production sector, NDFI gave between $200 million and $350 million to several private companies to build thermal power stations, he added.
At that time, the US dollar was worth less than 40,000 rials but is currently trading at over 260,000 rials.
The official noted that the rate has risen sevenfold and NDFI wants the private sector to settle the debt based on the current rate and not the old exchange rate, which is unfair and impossible.
For instance, a company that borrowed $200 million must repay $1.4 billion to the lending fund and many such companies are unable to settle their debts calculated at such prohibitive rates.
As per the proposal ratified by the Cabinet in 2015, NDFI’s debts should be repaid based on the exchange rate at the time of granting the loan, but the fund does not accept it and the issue has remained unresolved.
Oddly, the electricity generated by the private sector is still being bought on the basis of tariffs used in 2014!
In the dispute between NDFI and the private sector, the Energy Ministry supports the former and insists that the latter should repay its debt at the current forex rate.
It is noteworthy that the ministry owes at least $2.5 billion to private sector contractors.
Annual power generation in Iran is 65,000 MW and the average annual export amounts to 10 million kilowatt hours destined largely to Iraq, Pakistan and Afghanistan.
Energy Bourse
Private companies are not allowed to sell electricity (directly) and their output must be delivered to Iran Power Generation, Distribution and Transmission Company (Tavanir), which policy has added to their problems because private firms cannot generate income by selling power via the Energy Bourse in Tehran.
Reza Haddadian, a member of Iran Electrical Industry Syndicate, said the power industry’s future is in jeopardy and called for effective measures to address the key sector’s litany of problems.
Private sector investment in the power industry is said to be near $22 billion and 50% of the power demand are supplied by private power stations.
“The failure to adopt new and efficient policies [allowing private companies to sell electricity directly or raising power tariffs] is demotivating. That’s why private companies are simply not interested in undertaking any new power projects,” he said.
Government investment in the sector is out of the question, as the economy stutters due to the huge decline in oil exports and the ballooning budget deficit.
According to Mostafa Rajab- Mashhadi, the Energy Ministry’s spokesman, consumption in Iran grows by 5-6% per year but expansion plans have been undermined due to financial constraints, management issues and energy subsidies.
“The Energy Ministry repaid $900 million in debt to private contractors in 2019, but still owes $2.5 billion,” he said.
Referring to subscribers’ debt to Tehran Regional Power Company, he said it is $17 million, a big part of which are bills unpaid by state companies and organizations. He did not name names, nor say why the debts were pending.
