Tehran Marks Upturn in Energy Investments

EghtesadOnline: Iran has sealed more than $15 billion in contracts in its energy sector since the historic nuclear agreement between Tehran and the six world powers in July 2015 as the resurgent energy market prepares for major foreign and domestic investments.

News ID: ۷۳۹۱۸۶

14 January 2017

"New sources of funding, access to cutting-edge technology and finalizing projects to improve efficiency and reduce consumption in the water and electricity sectors have been facilitated thanks to the nuclear deal," said Alireza Daemi, the deputy energy minister for planning and economic affairs said, IRNA reported.

"The ministry has ratified €15 billion ($15.9 billion) worth of water and power deals over the past 18 months … We have the potential to attract another $50 billion in foreign investment in the water and power sectors, though the financing will be a long and gradual process," he said.

Iran and the six world powers (the five permanent members of the United Nations Security Council plus Germany) reached a landmark deal in July 2015 to place curbs on Iran's nuclear activities in exchange for lifting an array of financial and economic sanctions. The deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), came into force in January last year, allowing Iran to open up its cash-strapped economy to foreign investors, according to Financial Tribune.

"Over the past year many foreign investors expressed interest in financing renewable and clean energy projects in Iran and several projects were approved, most notably the deal between MAPNA Group and Germany's Siemens," Daemi said.

Iran's top engineering and energy enterprise MAPNA signed a deal last year to acquire the knowhow to manufacture Siemens gas turbines in Iran and buy more than 20 gas turbines and associated generators from the German industrial giant over the next decade.

Siemens delivered the first F-Class turbine to Iran in September which is to be used in a power plant in the southern city of Bandar Abbas.

"The import of F-Class turbines, which significantly raise electricity production efficiency, is one of the outstanding achievements of the JCPOA," said the official.

The ministry also signed a $4.2-billion preliminary agreement in June with Turkish company Unit International to build seven natural gas power plants. The deal, which has been hailed as the biggest energy agreement in Iran since the easing of international restrictions, is expected to be finalized by March.

Hamid Chitchian, the energy minister, recently said the nuclear accord has not only paved the way for attracting foreign investment, but also facilitated the export of technical and engineering services and equipment.

Iran is increasing its footprint in the energy markets of Africa as well as East and Southeast Asian countries such as Sri Lanka and Indonesia, according to Chitchian. Tehran is also vying for a key role in the reconstruction of Iraq, Syria and Afghanistan whose infrastructure  have been severely damaged by years of internal  strife and the devastation created by militant groups and terror outfits

--- Potential for Export

Iran, with an installed power generation capacity of 75,000 MW, can turn into an electricity supplier to the European Union countries, the deputy minister said without elaboration.

He added that Iran has high potential to develop wind and solar energy as "75% of the country is exposed to high levels of solar radiation which gives it great potential in the renewables sector."

Around 62,000 MW, or 80% of Iran's 75,000-MW output, is generated from thermal plants that burn fossil fuels. In addition, 12,000 MW comes from hydroelectric plants and 1,000 MW from the sole nuclear power plant in Bushehr. However, total installed capacity of renewables is barely 240 MW.

"Iran is gradually turning to renewable energy to avoid the (negative) effects of generating power in traditional ways," he said. "Iran ranks the first in terms of producing electricity in the region and has the capacity to supply the EU with their electricity needs," Daemi noted.