An Iranian official says negotiations with Turkish energy company Unit International to build two natural gas combined cycle power plants in Iran with $1.2 billion of investment are in the final stage.
Negotiations have dragged on since June 2016 when Unit International reached a deal to build seven natural gas power plants in Iran before the two sides cut down the scope of the agreement to two facilities.
“For the details of starting the construction of two power plants by Unit, we have been negotiating for a year and are now in the final stages,” Managing Director of Thermal Power Plants Holding Company (TPPHC) Mohsen Tarztalab said Monday.
The projects include building a 1,200-MW plant in the central city of Saveh and an 800-MW plant in Zahedan near the Pakistani border, which “will likely be finalized in the next few months,” Tarztalab said.
“However, it must be admitted that the investment in power plants has become hard and we have to tolerate it,” he said.
Tarztalab has said in the past that European banks were being sought to provide 70% of funds, with the remainder to come from domestic lenders.
The H-Class turbines to be used in the two power plants are to be purchased from German engineering giant Siemens which has already announced winding down business in Iran in anticipation of new US sanctions.
The initial deal was worth $4.2 billion, with the power stations due to have a combined installed capacity of 6,020 megawatts but it was cut down to one-third.
Tarztalab said all the necessary licenses had already been issued by the Iranian government but the issue of securing state guarantees acceptable to foreign investors and lenders had become a time-consuming process.
Iran’s power industry, currently at 80,000 MW of installed capacity, is facing an average demand growth of 5% a year which calls for building annually 5,000 megawatts of additional power generation capacity at minimum.
The country currently has 77,000 megawatts of power capacity, of which 360 megawatts is renewable energy. Most of the electricity generated in the country comes from thermal power plants which use fossil fuel.
As part of its development programs, the government is eyeing renewables as the new alternative to fossil fuels which constitute about 90% of Iran’s energy mix.
The country has currently 400 MW of renewable capacity in place but it has signed a raft of agreements, mostly with European companies, to produce more green energy.
Deputy Energy Minister Homayoun Haeri said in January that Iran’s renewable energy capacity would grow to 1,000 megawatts (MW) this year.
There is also room to establish about 20,000 MW of wind and solar power capacity in the country in total, he said.
Last August, Unit International signed a $7 billion agreement with Zarubezhneft and Iran’s Ghadir Investment Holding to explore oil and natural gas development opportunities in Iran.