Iraq announces $7bn worth of electricity deals

The new projects will reduce shortages although it will likely be years before Iraqis have full-time power.

Iraq's minister of electricity announced US$7 billion (Dh25.7bn) worth of major deals yesterday to help plug the country's electricity shortage, but all signs indicate it will be years before Iraqis can hope to have 24 hours a day access to power. The ministry signed preliminary deals with General Electric, Siemens and a third unidentified company for equipment to generate 9,800 megawatts of electricity, Karim Waheed, the electricity minister, told Reuters.

"These deals will help us end the electricity supply problem by 2012," Mr Waheed said. GE will supply turbines and other equipment to generate 6,800mw in a deal worth between $4.8bn and $5.4bn, while Siemens's equipment will produce 2,000mw for between $1.4bn and $1.6bn. A third company will supply 1,000mw of capacity for an undisclosed sum. Iraq's electricity shortage is one of the biggest sources of complaints about the government and a major impediment to economic growth and expansion of oil-production capacity.

Authorities ration power and the average consumer has electricity for only half a day. The shortage is partly filled with private diesel generators and imported electricity, but lights and air conditioning go off in the average home for at least several hours each day. Four different electricity ministers in the past five years have promised to fix the problem, but they have been hampered by sabotage, disorganisation and corruption.

Mr Waheed said yesterday that the fall in violence had encouraged outside investment in the country's power grid, after years of neglect. "Now it is getting better and we can encourage companies to come and work here," he said. "But security was so bad during the past few years, what could we do? Nobody would come here." In its latest assessment, the US State Department said the country's grid met 53 per cent of electricity demand, supplying just more than 11 hours of power per day. The assessment said demand had increased nine per cent since September last year.

Last month, Abdel Mahdi, a senior ministry official, said the country was finally producing as much electricity as it did before the US invasion in 2003, but demand had increased by more than 50 per cent in the past six years. Mr Mahdi said the country would not meet surging demand until 2012 at the earliest, based on a forecast that he acknowledged was optimistic. The government's inability to secure power supplies has been one of the most politically contentious issues in Iraq.

Two weeks ago, members of the Unified Iraqi Coalition, the main Shiite bloc in parliament, called on Mr Waheed to resign. The country's first post-war minister, Aiham al Sammarae, was jailed on corruption charges but escaped prison in December 2006 with the aid of private security guards, an episode that highlighted the government's lack of control. Samuel Ciszuk, a Middle East energy analyst at Global Insight in London, noted in a recent report that Iraq was still far from building effective power infrastructure, despite the gains made this year.

"The stability needed to build and operate a national electricity network is often underestimated by political and media commentators, and it will be years before Iraq's electricity supplies are fully restored," he said. Mr Ciszuk warned that power shortages were hurting the country's oil production and harming exports - the government's main source of operating revenue. "It seems that Iraq's short supply of electricity will be the main obstacle that its oil and power industry needs to overcome in the coming years," he said.

* With Reuters [e-mail]