Iran opens talks with Siemens, Rolls-Royce on energy investment

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Iran is stepping up the search for overseas investment in its energy infrastructure after talks with Siemens and Rolls-Royce that point to the gradual opening of the country’s economy following the lifting of international sanctions.

Hamid Chitchian, Iran’s energy minister, met representatives of both companies in London last week to discuss collaboration in power generation technology.

The talks were focused on so-called decentralized power generators that can provide more localized and flexible supplies of electricity than big power stations.

No deals were struck but Chitchian told the Financial Times that Siemens and Rolls-Royce were interested and he hoped to “reach a result” soon.

Rolls-Royce said last week’s talks with Chitchian involved the potential use of piston engines made by the group’s power systems business in Germany.

“The minister requested a meeting with Rolls-Royce to discuss the renewal of Iran’s energy infrastructure and whether our diesel and gas power generation systems have a role to play,” it said.

Siemens said: “We have a close dialogue with the Iranian government and local partners in the area of infrastructure, energy and technology. We have been active in Iran for about 150 years and we have never left the country.”

Any deals would add to a provisional licensing agreement in March to allow Mapna Group, an Iranian energy and infrastructure conglomerate, to manufacture Siemens’ F-class turbines in Iran for use in gas-fired power stations.

The lifting of international sanctions related to Iran’s nuclear activities in January has removed many barriers to foreign investment in the country, with its energy sector one of the areas of greatest interest.

Deals with western oil and gas groups are yet to fully materialize but energy infrastructure companies have been quicker to move in. Turkey’s Unit International last month struck a $4.2bn agreement with Iran’s energy ministry to build seven gas power plants.

Chitchian said he expected more deals in future. “We have received various proposals for investment inside our country; some for building power stations and some to manufacture power plant equipment.”

Many companies and banks remain wary of Iran. While international sanctions have been lifted, some unilateral U.S. sanctions remain.

Chitchian acknowledged there were “still some problems” because of the “slowness” of banks in resuming relations with Iran but he said the “trend is positive”.

“Those companies and countries that can immediately adapt to the new situation will be the winners,” he added.

Iran needs investment to modernize and expand its power network to ensure the country has enough electricity to support economic growth.

It plans to add 26,500 megawatts of generating capacity in the next five years on top of the current 75,000MW, according to Chitchian. Almost a fifth of the new capacity will come from renewable sources such as wind turbines as part of carbon-reduction commitments at the UN climate talks in Paris last year.

Dalga Khatinoglu, an expert on the Iranian energy market for the Natural Gas Europe news service, said Iran would need $15 billion of investment in new generating capacity in the next five years and a further $5 billion in the transmission network.

“Iran strongly needs immediate foreign investment because the country has no choice but to boost rapidly its power generation capacity,” said Khatinoglu. “Iran’s electricity export plunged during the past two years due to the rapid increase of domestic demand.”

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