Iraq signs $8 billion deals with Siemens and GE

IRAQ - Iraq recently entered into several preliminary agreements worth $7 billion to $8 billion with General Electric Company, Siemens AG, and an undisclosed third company to procure equipment to double its power generation.

The three agreements will enable war-torn Iraq to upgrade its power grid and add about 10,000 megawatts (MW) of power generation capacity by 2012.

Earlier this month, Iraq entered into a memorandum of understanding with GE to supply turbines for power generation of 6,800 MW. The unit cost of this purchase is reported to be between $700,000 and $800,000 per MW of power, which puts the total value of the deal at $4.76 billion to $5.44 billion.

Iraq has also entered into a deal with Siemens to procure equipment for power generation of 2,000 MW at a cost of $1.4 billion to $1.6 billion. The country is also reported to be in talks with a third firm to provide equipment for power generation of 1,000 MW. Iraq plans to approach engineering, procurement and construction firms to set up the proposed power projects once the deals with GE, Siemens, and the third firm are finalized.

Oil authorities from Iraq are scheduled to meet officials of Technopromexport on October 12 to review and revive a $124 million deal for repair works of 400 MW of power generation capacity at Basra. The deal was one among several that were frozen because of the invasion of the country led by the U.S. in March 2003.

Iraq is also in talks with Power Machines Company to revive another similarly frozen deal for the development of two power projects with a generation capacity of 160 MW each in the north of the country.

In June this year, Iraq signed a deal worth $480 million with GE to set up three power plants in various locations including southern Baghdad, Taji in the north of Baghdad, and in the southern city of Kerbala. It was also in talks with Hyundai Heavy Industries Company Limited for the supply of diesel generators. The projects are slated for completion between the end of 2009 and early 2010.

Iraq also entered into two more contracts with GE, each valued at $41 million, for the supply of spare parts for the three proposed power projects. In May, Iraq signed a $253 million contract with GE to purchase eight natural gas-fed generators, most of which are to be installed in Baghdad.

Iraq's bid to reconstruct its power grid and enhance its power generation capacity comes at a time when the country is facing chronic power shortages with only a few hours of electricity available to the capital city of Baghdad on a daily basis.

Power generation in Iraq currently stands at 5,500 MW, whereas demand is as high as 11,000 MW. GE and Siemens were among the several international players who had to pull their workforce from Iraq when it became dangerous during and after the U.S.-led invasion. However, increased security arrangements are being made in Baghdad to lure back international companies to develop projects in the country.