Iraq has abandoned its plans to develop four power plants as independent power projects (IPPs) and is now considering alternative funding options.

The country’s cabinet decided to cancel the tender on 24 May.

The Electricity Ministry received bids from developers in February. It is understood that the bid prices and level of experience of the bidders has led the government to reconsider the programme (MEED 20:2:11).

Iraq’s Oil and Energy Parliamentary Committee is considering different structures including an engineering, procurement and construction (EPC) hybrid that allows private investors to provide some of the capital expenditure (capex).

“We have decided to find a new approach for investment,” says Ala Disher Zamil, the head of the IPP programme at the Electricity Ministry. “[We are looking at] creating special-purpose companies as joint ventures between the Ministry of Electricity and the Trade Bank of Iraq with some investors to erect, commission and operate these four projects.”

An industry source says: “[This] will make it very difficult for them to attract any kind of private investment in electricity in future, though I believe they think they can do it all by engineering, procurement and construction – at least until the oil price falls again.”

The four IPPs were to add a total of 2,750MW in electricity generation capacity. The developers were set to be awarded 25-year build-own-operate (BOO) contracts to develop the gas-fired plants, using Frame 9E gas turbines supplied by the US’ GE.

Seven bids were submitted for the 500MW Diwaniya IPP in Qadisiyah governorate. Qatar’s Almco was in line for the contract along with another project – the 500MW Amara IPP – in Maysan governorate.

At least five bids were submitted to build the Shat al-Basrah IPP in Basra governorate, which was to comprise 10 x 125MW units. Jordan’s Mass Global and Turkey’s KAR Group were said to have been shortlisted.

A preferred bidder and second preferred bidder were lined up for the 500MW Al-Samawa IPP in Muthana governorate.

The electricity ministry had said the private developers would be responsible for securing gas feedstock for the projects with a review after four years. This aspect deterred many international developers.

The 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, the eight IPPs were reduced to five projects, which were reduced again in September 2010 to just four projects.

Iraq has an urgent need for power as most of the country suffers from crippling blackouts for most of the day. The country’s power demand is about double that of its installed generation capacity. Furthermore, demand is growing six times faster than capacity is being installed.