Iraq’s Electricity Ministry has cancelled its ambitious 3,250MW independent power project (IPP) programme in favour of a single project with a capacity of about 250MW.

According to a source close to the ministry, the location of the IPP has not yet been decided, but the ministry plans to start tendering the project in April-May 2012. The ministry recently undertook training to carry out the first IPP to originate from Baghdad.

Iraq previously launched an IPP programme comprising eight separate projects. The programme was scaled back from eight to four projects before bids were invited in February. The selected developers were 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. The turbines were secured as part of a mega deal signed with the ministry in December 2008.

The 2,750MW programme was then shelved in May, with sources close to the projects citing disappointing offers and level of experience of the bidders (MEED 10:6:11).

The ministry issued engineering, procurement and construction (EPC) contracts for the four projects and awarded contracts for a 500MW power plant at Amara in Iraq’s Maysan governorate and another 500MW facility in Diwaniya, Qadisiyah governorate. The contracts were subsequently annulled amid corruption allegations.

The government then considered relaunching the IPP programme with the addition of a power plant at Najebia, which was in the original programme line-up (MEED 4:11:11). The latest decision to tender a single project instead of a series of facilities reflects a more cautious approach by Iraq’s government.

The original programme deterred many international developers from bidding due to the absence of guarantees for the financing and gas supply. The ministry will use the initial 250MW power plant as a test case for future IPPs. 

However, it is unclear how the private sector will respond. Industry sources expressed concern for any future attempts to tender IPPs following the cancellation of the programme. “[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,” said one source on hearing that the original IPP programme was to be cancelled.