Baghdad seeks private-sector developers for Iraq power plants

13 December 2010

International power companies must submit proposals by mid-January

Iraq’s electricity ministry is seeking proposals from power developers to build, finance and operate four new power plants across the country to provide 2,750MW of additional electricity generation capacity.

Interested companies must submit proposals to Baghdad by 16-20 January for the four gas-fired plants, which are:

  • Samawa, Muthana governate: 4 x 125MW = 500MW
  • Diwaniya, Qadisiyah governate: 4 x 125MW = 500MW
  • Shat al-Basrah, Basra governate: 10 x 125MW = 1,250MW
  • Amara, Maysan governate: 4 x 125MW = 500MW

Baghdad is offering four 25-year build-own-operate contracts to develop the gas-fired plants, which will use Frame 9E gas turbines supplied by the US’ GE.

Interested companies can bid to develop a single plant or multiple projects. The proposal deadline varies on each plant.

Payments to developers will be based on both the availability of power facilities and the amount of power produced by the projects. Payments will be guaranteed by letters of credit.

The ministry and its advisers intend to conclude bid evaluations by March 2011, carry out negotiations with the bidders in April and May and reach financial close between July and September 2011.

Developers at MEED’s Iraq Utilities 2010 conference in Istanbul said they were concerned over the government’s highly ambitious tender schedule. According to several delegates, the January deadline for bid submissions is difficult to meet and will result in the submission of bids without adequate analysis and detail.

Baghdad’s advisers on the programme said developers had been given plenty of opportunity to prepare bids. Speaking in Istanbul, Richard Kupisz, associate director of UK-based IPA Energy + Water Economics, said the first version of the request for prequalification (RFP) was issued to prospective bidders several months ago.

Iraq’s power demand is about double that of its installed generation capacity. Further, according to Kupisz, demand is growing six times as fast as capacity.

The selected developers will be responsible for securing gas feedstock for the projects. This will be reviewed in four years’ time. The issue of fuel access has deterred several international developers that are uncomfortable with accepting fuel risk.

Developers will also need to negotiate project-specific power purchase agreements (PPAs) and in the absence of relevant legislation, regulation will be by contract model. The government has indicated that contract commitments will take precedence should they be signed before an electricity law, which is currently being debated in parliament, is passed.

The issue of bankability is also a major consideration for potential bidders. According to Kupisz, the government is looking for some evidence of access to funds in the form of equity or debt. An industry source says financing the projects on a traditional project finance basis will be impossible until the gas supply and security issues are eliminated.

Eight or nine companies are set to submit bids to develop the projects, says Kupisz. However, these companies may or may not be sufficiently qualified to carry out the work. In a bid to speed up the independent power project (IPP) programme, the government opted to issue an RFP without a qualification stage.

Bids will be evaluated in two stages. The first stage will assess technical capabilities and the second will consider financial aspects. Bids will be assessed on the following basis:

  • 35 per cent - tariff
  • 25 per cent - financial strength
  • 25 per cent - experience developing, establishing and starting up of the project

Iraq’s IPP programme has evolved many times since its launch. The original scheme comprised eight projects including five facilities using GE technology, two projects using units supplied by Germany’s Siemens and one project supplied by a Russian licensee of Siemens.

In July 2010, a bidders’ conference for developers was converted to a workshop and the eight IPPs were reduced to five projects. This was then reduced again in September to four projects.

The projects that are no longer IPPs are to be tendered as EPCs except the Russian licensee project, Dibis 1 in Kirkuk province, and another GE project, Nassariya in Dhi-qar, which were both shelved.

The following EPC projects will be tendered first:

  • Al-Khayrat, Karbala governate: 10 x 125MW = 1,250MW
  • Qudas, Bagdad governate: 4 x 125MW = 500MW
  • Al-Qayira, Ninawa governate: 6 x 125MW = 750MW

The three projects will use Frame 9E turbines from GE as will the following plants, which will be built in the second phase:

  • Mansuria, Diyala governate: 4 x 125MW = 500MW
  • Wasit, Wasit governate: 6 x 125MW = 750MW
  • Basra, Najebia governate: 4 x 125MW = 500MW

Three additional projects using Siemens turbines are also to be tendered as EPC facilities:

  • Bayji, Salah ad Din governate: 6 x 160MW (using V94.2 turbines) = 960MW
  • Taza, Kirkuk governate: 1 x 260MW (using V94.3 turbines) = 260MW
  • Sadr City, Baghdad governate: 2 x 160MW (using V94.2 turbines) = 320MW

The GE turbines for the power plants were procured by the ministry in a $3bn deal, while the Siemens units were secured in a similar transaction worth $2.1bn. Both deals were signed in December 2009.

IPA Energy & Water Economics DLA Piper, both of the UK, and US-based law firm Chadbourne & Parke are advising the ministry in its IPP programme.

Iraq’s Oil Ministry is overseeing the Electricity Ministry temporarily following the resignation of electricity minister Karim Waheed.

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