Iraq plans to tender for a 1,000 megawatt power plant worth about $1 billion, a senior electricity official said, part of efforts to plug a power shortage that has crippled reconstruction after years of war.
Iraq is due to begin talks on Thursday in Washington with JPMorgan Chase & Co, the U.S. Export-Import Bank and the World Bank for a loan of up to $2 billion, lasting up to five years, to fund electricity development, the official said.
Iraqi banks may also contribute to the loan.
"We are preparing the specifications (of a tender) … We will offer a tender for a 1,000 megawatt power plant," Raad al-Haris, Iraq's deputy electricity minister, said on Wednesday.
Electricity supply is seen by Iraqis as an important indicator of progress after years of war since the U.S.-led invasion in 2003. Iraq's maximum daily output is 6,750 megawatts, providing only intermittent power for 14 hours a day.
About 95 percent of Iraq's revenues come from oil sales — the country's holds the world's third largest reserves — and a fall in prices by about two thirds since a peak of $147 last summer has slashed Iraq's budget.
Money set aside to develop Iraq's electricity capacity this year has fallen to $1.1 billion from $3 billion in 2008, putting on hold electricity deals with firms including France's Alstom and Korea's Hyundai Corp, Haris said.
"It (the oil price fall) has a big effect on the projects and on everything because we have started to put on hold many things which are not urgent," he told Reuters in an interview.
Iraq is currently in talks to reschedule payment and implementation of an earlier $3 billion deal with General Electric for 56 gas power turbines, and another contract worth 1.5 billion euros with Siemens AG.
The ministry hopes to modify the original three-year timetable to complete the deals, Haris said, pushing off some of the implementation and payment that had been scheduled for 2009 until 2010.
PLANT TENDER, RISING PRICES
The tender to build a new 1,000 megawatt plant is due to be issued within two months, and Iraq has not decided whether it would contribute towards the project, Haris said.
The plant would be fully owned by the investor, and Iraq expects to buy the electricity produced at between 3.3 and 3.5 cents a kilowatt plus fuel costs, depending on security conditions and the energy source used at the plant, he added.
Iraq has begun a programme to raise electricity prices, a move key to attracting more foreign investment in the sector, Haris said. Iraq currently subsidises power, and Iraqis pay about 0.5 cents a kilowatt, though many pay more for power produced through private generators that supplement state power.
Years of war, sanctions and underinvestment has severely degraded Iraq's electricity production capacity, and the country imports power from neighbouring Iran and Turkey.
Adding strain on Iraq's grid is the flood of cheap electric devices into the country since U.S. forces toppled Saddam Hussein six years ago, Haris said.
Electricity consumption has grown at rate of 15 percent per year to 11,000 megawatts since then, and Iraq is struggling to keep up, he added.
The country will carry out a feasibility study regarding the use of nuclear power in the long term, and currently favours France as a foreign partner in any deal given that it built Iraq's last nuclear power plant, Haris said.
The plant was destroyed by an Israeli airstrike in 1981.
