Iraq’s Ministry of Electricity is continuing to work on its private power plans despite the announcement that its original approach to four initial projects had been scrapped, speakers told the MEED Iraq Power & Gas Projects 2011 conference on 13 June.
The ministry’s independent power project (IPP) programme called for private investors to participate in four power stations with total capacity of 2,750 MW.
Ala’a Zamil, Head of IPP projects at Iraq’s Electricity Ministry, said that a proposed new approach would entail establishing a special purpose vehicle (SPV) incorporated in Iraq that would be owned by the ministry and an Iraqi entity. The SPV would then set up four subsidiary SPVs, incorporated in jurisdictions acceptable to investors, that would be responsible for developing the four power plants.
Zamil said that the original plan had called for the Trade Bank of Iraq (TBI) to be the partner in the Iraqi SPV. The ministry’s shareholding in the SPV would be represented by the gas turbines to be used in the projects, which the ministry has already bought. Secretary-general of the Iraq council of ministers, Ali al-Allaq, said earlier in June that TBI is under investigation for alleged irregularities.
Salem Chalabi, Head of Iraq practice at DLA Piper, who advises the ministry, said that the original approach to developing IPPs had been scrapped because the ministry believed it was “unfair”. The proposed internal rates of return quoted by developers were deemed to be too high.
Chalabi said that the ministry will have to overcome three major issues: the lack of an independent regulator; the limited capacity to collect electricity fees from consumers and environmental concerns.