Lack of Guarantees Impede Investment

Lack of Guarantees Impede InvestmentLack of Guarantees Impede Investment

Private sector’s participation in energy projects has been affected by a lack guarantee for the return of the money invested in infrastructure and power plant projects, managing director of the Iran Electricity Industry Syndicate was quoted by Mehr news agency as saying.

The government’s delayed payments for electricity projects have incapacitated private investors, Alireza Kolahi said, urging the authorities to take immediate measures to resolve the issue.

On the energy ministry’s utilization of sukuk to settle its debts, the official said: “Since guarantees issued by the previous government could not be obtained in cash, it should be made clear whether the present guarantees are recoverable,” he said without further elaboration.

Sukuk commonly refers to the Islamic equivalent of bonds. However, as opposed to conventional bonds, which merely confer ownership of a debt, sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk.

Kolahi also criticized the government’s agreement with China according to which all equipments required for projects funded by the Chinese must come from Chinese manufacturers. Accordingly, between 51 to 70 percent of all equipment and machineries should come from China if the Asian country provides the finances.

There is a growing concern that utilizing Chinese products and equipment is not good news for domestic manufacturers as Iranian contractors will be sidelined as a result. Iran aims to recover part of its frozen oil revenues from China by letting the Chinese finance electricity and petrochemical projects.

“The government and the oil ministry seem to have no other option for recovering frozen revenues,” Reza Padidar, chairman of the board of the Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM) said in October.