Private Power Producers in Iran Want a New Deal to Remain in Business

EghtesadOnline: Due to the near permanent fluctuations in currency rates in the last two years, power purchase contracts with private electricity producers need revision, says a board member of Rudshur Power Plant in Markazi Province.

News ID: ۷۸۵۲۲۴

07 January 2020

“Generating power under the current contracts is not economically feasible,” Bahman Masoudi was quoted as saying by IRNA.

Rudshur Power Plant is the first private power station in Iran which was built thanks to Iranian expertise. The first phase of the plant (a gas unit) became operational in 2007 with a capacity of 792 MW. The main fuel of the plant is gas and diesel is the back-up fuel, Financial Tribune reported.

In 2013 when a barrel of oil sold for $120, the Energy Ministry signed an agreement with the power plant owner to convert it into a combined cycle station.

As soon as the conversion process is done, the plant can save up to 720 million cubic meters of natural gas a year for which the investor in the plant will receive a fixed amount (in foreign currncy) because of the saved fuel.

After a while (2018) when oil prices plunged to $60, US sanctions were imposed and the forex market was in chaos, the settlement (signed in 2013) changed and the ministry informed the private company that it would be paid in rials.

“We generated $115 million worth of electricity in 2018 (then 1USD fetched 4200 rials). But we were not paid a dime and now that they want to settle our debt, value of the rial has plunged by 225%,” Masoudi complained.

The (conversion) project is almost half complete. Nonetheless, continuation of the project (under the current arrangements) is not financially feasible.

Not only Rudshur Power Plant but also four more other satiations (namely Caspian in Nowshahr Port in Mazandaran province, Urmia Power Plant in Urmia, West Azerbaijan Province and Khaf Power Station in Khaf County in Khorasan Razavi Province) are facing a similar dilemma.

“All these plants are supposed to be synchronized with the national grid by June 2020, but they will not unless the Energy Ministry revises its contracts,” Masoudi warned.

Refusing to rewrite the terms and conditions of the deal(s)  will further dissuade private firms from accepting new power projects, he noted.

The efficiency of Rudshur Power Plant is 40% and it has generated close to 48 million kilowatt hours of power since 2007.

The plant succeeded in obtaining “Green Industry” emblem from the Iran Environmental Protection Agency (EPA) in the years 2009, 2016 and 2017 confirmed by the United Nations Industrial Development Organization.

Besides, the results of measuring exhaust gases from stacks of this power plant are much lower than the permissible limits set by Department of Environment.