Iran's Power Plant Deals With International Companies Upwards of $10b

The Energy Ministry says at least 50% of operations in all new power plant contracts will be carried out by domestic companies
Iran meets almost 80% of its electricity demand from thermal plants.
Iran meets almost 80% of its electricity demand from thermal plants.

Iran has signed billions of dollars in contracts since the easing of sanctions in January 2016 to develop its electricity generation infrastructure, a top energy official says.

"We have signed around €10 billion ($10.7 billion) worth of agreements with German, Russian, Chinese, South Korean and Turkish companies for the construction of new power plants," Alireza Daemi, the deputy energy minister for planning and economic affairs, was quoted as saying by Mehr News Agency.

The official described the preliminary agreement with Turkish energy and construction company Unit International as one of the biggest of its kind after the international restrictions were eased and hoped the ministry will finalize the deal before the end of the Iranian fiscal year in March. 

Unit International signed a $4.2 billion preliminary deal with the Energy Ministry in June to build gas power plants in seven regions in Iran. The power stations would have a combined installed capacity of 6,020 megawatts.

"The deal with Unit International is an agreement in principle … it is expected to be approved as a full and final contract by the yearend," the deputy minister said. He also sought to allay concerns over the role of domestic contractors in future energy projects.

"The ministry will ensure that at least 50% of operations in all new power plant contracts, including with Unit International, will be carried out by domestic companies," he said, underlining the transfer of knowhow as a key requirement on the part of multinationals wanting to work in Iran.

German engineering giant Siemens is also in agreement to supply its turbines to Iranian power plants. Siemens signed a deal last year to deliver 20 F-Class turbines and also share turbine manufacturing knowhow. 

The company also said last week that it has received a major order from Iran's Hampa Engineering Corporation for 12 compressor trains to be used in two onshore gas processing plants. Mohsen Nayebzadeh, CEO of Siemens in Iran, said the deal is the company's "first huge oil and gas order since the easing of sanctions."

Meanwhile, Moscow, Tehran's economic and strategic partner, is making sure that Russian companies will get their fair share of energy projects in the Iranian market.

Russia's major energy company,‌ Technopromexport, is due to start construction of a 1,400 MW thermal power plant in the southern Hormozgan Province next month. 

The power plant which comprises four units, each with a capacity to produce 350 MW, will be up and running in five years.

The Russians will reportedly finance 85% of the cost of the project estimated at $1.6 billion.

However, Daemi appears to have excluded Iran-Russia's lofty nuclear energy deal from his account of post-sanctions power deals.

Iran is poised to build two new reactors with Russian help at the site of its only nuclear power plant in Bushehr in the south. The new units reportedly will cost $10 billion. Construction is expected to begin next month and last a decade.

With an installed power production capacity of around 75,000 megawatts, Iran meets almost 80% of its electricity demand from thermal plants that have been operating for decades. Close to 12,000 MW is produced from hydroelectric plants and 1,000 MW from the sole nuclear power plant in Bushehr, south Iran.

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