Tue Aug 23, 2016 9:51AM
Turkey's Unit International plans to construct 5,000 megawatts of power capacity in Iran.
Turkey's Unit International plans to construct 5,000 megawatts of power capacity in Iran.

Iran and Turkey’s Unit International have concluded negotiations on $3 billion of investment to build 5,000 megawatts of power capacity, awaiting the government’s go-ahead in Tehran to seal the deal.  

The Belgium-based energy firm’s chairman Unal Aysal on Monday met Iran’s Energy Minister Hamid Chitchian in Tehran where they agreed on the terms of the contract, the Fars news agency reported on Tuesday.   

“At the moment, the signing of the final agreement awaits the Ministry of Energy’s go-ahead,” head of Thermal Power Plants Holding Company of Iran Mohsen Tarztalab said.

The official said the ministry has got to do the paperwork and issue necessary licenses for the signing which he saw “unlikely within the current week,” Fars said.

“The contract is being prepared to be sent to the Ministry of Energy. If it is accepted, the ministry will announce it for necessary measures to be taken,” Tarztalab said.

The Turkish energy company signed an initial deal with Iranian Energy Ministry in June to build seven natural gas combined cycle power plants in Iran.

Construction of the plants is planned to begin in the first quarter of 2017, the company has said. When completed, the facilities would meet 10 percent of Iran's energy needs.

The power plants will be built in the cities of Ahvaz, Dehloran, Zahedan, Saveh, Sufian and Bonab.

Karun 3 Dam in Izeh in Iran's Khuzestan Province

The project is set to improve commercial and economic relations between Iran and Turkey which seek to raise the volume of their annual trade to $30 billion.

Bilateral trade stood at $22 billion in 2014 before declining to $9 billion due to US-led sanctions on the Islamic Republic.

Unit International is no stranger to Iran's energy market. Since 1982, the company has built five power plants with a total capacity of 3,200 megawatts in the country which owns the world’s largest gas reserves.

Iran’s agreement with Unit International is part of a much wider effort to boost its power capacity. The country currently produces 74,000 megawatts of electricity, but it plans to raise this to more than 120,000 MW within the next 10 years.

Officials say some 5,000 MW of additional power has to be produced a year to meet rising demand in the country of 80 million.

A view of a wind farm in Manjil in northern Iran

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 existing renewable capacity is focused on hydro power plants which produce about 8,500 MW. Just 150 megawatts of green power plants are currently operating in the country.

The government plans to install 5,000 MW of renewable capacity, putting Iran among the likes of the UK and France in this category. The Ministry of Energy is already implementing 500 MW wind converters and further 100 MW biomass projects.

The Middle East’s first geothermal power plant, a 50-megawatt pilot project, is being built at the foot of an inactive volcanic peak in northwest Meshguin Shahr.

However, Iran’s renewable energy potential is huge where only the wind capacity is estimated at 30,000 megawatts.

German companies are reportedly about to begin next year building wind farms in Iran at a cost of $331 million. In August, they signed a document for generation of 100 MW of wind power plus 400 MW of solar in the southern Khuzestan province.

Italy’s Fata, the engineering unit of leading industrial group Finmeccanica, also signed then a 500 million euro ($543 million) contract with Ghadir Investment Company to build a power plant in Iran.