He added that construction would begin in March 2008. But other Tavanir executives say Xenel has yet to sign a deal.

A source close to the scheme says: “The project is probably dead.”

The Heris plant has been under discussion since the late 1990s. However, rapidly rising engineering, procurement and construction costs mean the tariff that was initially proposed is no longer economically viable for Xenel.

The stand-off over Iran’s nuclear power programme has also made foreign investors very wary.
“In the current state of international relations, no one is willing to finance the project,” says the source. “I do not think anything is going to happen soon, except through local cash and banking.”

In 2005, the most recent figures available, Iran’s power generation capacity was 41,003MW. Tavanir says an additional 4,948MW is needed by 2019. Xenel could not be reached for comment.