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Lack of export credit cover hampers Iraq energy projects

Plans for private sector investment in infrastructure to deliver Iraq’s 20 year electricity masterplan are at risk because of a lack of cover from export credit agencies experts have warned.

Export credit agencies play a vital role in guaranteeing vital project finance loans from banks which fund major projects like power stations. Without bank loans, developers and contractors are unable to finance these schemes.

“A key concern is to project finance,” said Jeff Larkin, Iraq country manager for Parsons Brinckerhoff, which produced the masterplan. “There is a lack of export credit cover and we are discussing this with UK and United Stayes governments.”

The UK’s Export Credit Guarantee Department (ECGD) and the US Ex-Im Bank are among the few agencies that support lenders to projects in Iraq.

ECGD says its £100M limit is based on the country’s previously unstable political position. Experts fear that this level of cover is too low to attract banks.

“The limit reflects the instability […] and is not indicative of the value of the country”

ECGD spokesperson

“The limit reflects the instability that has been experienced over the past seven years and is not indicative of the value of the country. As the new government stabilises, we will keep the market under review.

We recognise the need and the interest in the country,” said an ECGD spokesman.

The issue was raised at the Iraq Ministry of Electricity masterplan conference in Istanbul last week, organised by the ministry with consultant Parsons Brinckerhoff.

The consultant has been working with the ministry to develop a 20 year masterplan for the country’s electricity network. The plan, which runs to 2030 outlines a need to invest £16bn in new generation, transmission and distribution infrastructure over the next five years plus a further £2.5bn per annum to 2030.

Private investment is a vital part of the strategy beginning with four new independent power projects with 2,750MW capacity that are currently seeking bids.

The country is currently plagued by blackouts as demand for power continually overcomes the installed generating capacity. Base load demand is forecast to treble from 11,248MW in 2009 to 32,535MW by 2030.

Parsons Brinckerhof estimates that the economic impact of inadequate electricity provision is a loss of £25bn per annum.

“The cost of demand not being met is $3 per kwh (£2). A lack of power hinders the economy, cement and steel factories can’t set up, tourism, commerce and trade are all affected,” says Larkin.

Plans for delivering 13,000MW of new generating capacity over the next 5 years are currently underway with gas turbines ordered from Germany’s Siemens and the US firm GE.

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