Energy Ministry $1.8b in the Red

Energy Ministry $1.8b in the RedEnergy Ministry $1.8b in the Red

Debt of the Energy Ministry to private power plants has reached a staggering 60 trillion rials ($1.8b), chairman of the board of directors at the Power Generation Companies Syndicate Mohammad Malaki said, ISNA reported Friday.

For power plants capable of bartering, or those that the Energy Ministry helped build, the figure (debt) has remained unchanged over the past year. Nonetheless, debts to power plants that were purchased in exchange for the energy ministry's previous debts, or had guaranteed purchase and conversion agreements with the ministry, have increased exponentially.

"Dues still not cleared for purchased power are a major challenge for the private sector and considering its exponential growth, it should have been dealt with much earlier," Malaki said. "Private companies are compelled to borrow at high rates from banks to meet expenditures and repay debts, while the ministry does not provide any compensation for delayed payments," the PGCS official complained.

Another issue that needs to be addressed is lack of investment in the electricity sector. "The PGCS is of the opinion that investment conditions have become stricter over the past years," he said without elaboration.

Given the fact that power generation capacity needs to increase 5-6% each year, huge investments are essential to meet the lofty goals, observers have been quoted as saying.  The present economic climate, however, discourages private investment, putting at risk the country's future power supply, especially in the industrial sector, Malaki said.

Power consumption is projected to grow by the same percentage in the current Iranian year (started March 21). In addition to the projected consumption growth, an anticipated increase in the temperature may disrupt supply in the summer, ministry officials have warned, urging the people to reduce consumption to avoid blackouts.  All power plants operated by the private sector are members of the PGCS. Private power plants accounted for more than 50% of electricity production last year.

Construction of power plants has declined in recent years. Although the government has encouraged private enterprises to cooperate, their participation in energy projects has been affected mainly due to the lack of guarantee for the capital returns.  Declining investments and the economic recession are among other challenges the key electricity sector is facing.

Iran’s electricity industry is 14th in the world and first in the Middle East in terms of power  generation with an installed capacity of 73,000 MW. The country is the largest exporter and importer of electricity in the Middle East and exports electric power to Armenia, Pakistan, Turkey, Iraq, and Afghanistan. Azerbaijan and Armenia supply electricity to Iran under a swap agreement.