Mismanagement and bureaucratic deadlock in Iraq’s electricity ministry have short-circuited a quick-fix plan for some 50 power plants to alleviate the country’s severe power shortage, officials say.
Electricity minister Raad Shallal al-Ani, whom Prime Minister Nuri al-Maliki has moved to dismiss but who must still be questioned by parliament, announced on March 23 that Iraq planned to build 50 power plants with a capacity of 100 megawatts by the summer of 2012.
But so far, contracts have been made for 44 of the 50 units, and all have fallen through or are in limbo, according to Iraqi officials.
Iraqi electricity production and imports from Syria and Iran total about 7,000 megawatts, with demand around twice as much and rising at a rate faster than supply is currently being added.
An aide to Maliki said Sunday that Ani was being dismissed for approving allegedly improper power station contracts — one with Canadian firm Capgent and another with Germany’s MBH — to expand power provision in Iraq.
On July 2, Capgent signed a 1.66-billion-dollar contract with Iraq’s electricity ministry to build 10 power plants of 100 megawatts each over a period of 12 months.
Four days later, Baghdad signed a $625 million contract with MBH to build five power stations with a total 500 megawatts capacity in 11 months.
But Deputy Prime Minister for Energy Hussein al-Shahristani told a news conference on Monday that Capgent was “a company on paper only” and MBH was bankrupt and facing legal trouble.
“The contracts with the phantom and bankrupt companies have been cancelled and lawsuits filed against them,” Shahristani said.
He announced the formation of a committee “to investigate the electricity minister, and all the people that played a role from the technical, contractual and financial sides in the ministry.”
But, he stressed that “this does not mean that the big projects are affected, as the projects of the ministry to obtain 7,000 additional megawatts by the end of 2013 are moving forward.”
The electricity ministry spokesman could not immediately be reached for comment regarding the power deals.
Iraqis receive just a few hours of national grid power a day with which to run air conditioners and refrigerators in blistering 50-plus degree Celsius (122 Fahrenheit) heat.
Power, and the lack thereof, has been a constant complaint of Iraqis, thousands of whom protested in the south of the country last year to bemoan poor electricity supplies.
The government has sought to head off similar rallies this year by pushing a raft of proposals, including one that provides free fuel to private generator operators on the condition that they sell it at a reduced price to Iraqis.
Several other planned deals are languishing.
In April, Iraq awarded China National Machinery & Equipment Import & Export Corp a $204.4 million contract to build a 500 megawatt electrical power plant consisting of four 125-megawatt units in the southern province of Basra, with the project due to be completed in 18 months.
But the head of the electricity committee in Basra province, Ziad Fadhel Ali, said that “the electricity ministry did not sign the final contract, and we don’t know until now the reason for the delay.”
“Since the signing of the initial agreement, the company has not taken any step towards implementing the contract because of the obstruction of the electricity ministry,” Ali said.
In May, meanwhile, South Korea’s STX Heavy Industries signed a $2.76 billion deal to build 25 diesel power plants in Iraq.
But an Iraqi government official, speaking on condition of anonymity, said that the deal fell through because the firm did not receive the necessary guarantees from Korean banks.
“Korean banks did not provide the company with financial guarantees, so they stopped implementing the contract,” the official said.
Another Iraqi official, who also did not want to be identified, said Iraq “contracted with these companies with the aim of quick success,” as they claimed to have been able to set up power stations quickly.
“The big international companies want guarantees for projects paid (after completion) from the parliament or the finance ministry, but parliament did not cooperate with the government in this regard,” he said.
“Therefore, the government was not able to convince major companies to come” invest in the sector.