General Electric and Siemens have signed agreements for large power generation deals in Iraq, laying the ground for both companies to win multibillion-dollar contracts in the country.
GE said on Sunday it had signed principles of co-operation to add 14 gigawatts of power generation capacity, with an immediate order for 1.5GW to come into service next summer.
On Saturday, Siemens signed what the German engineering company called a “landmark” agreement to supply Iraq with 11GW of power generation over four years.
Neither agreement is a binding contract, but both companies hope they will lead to large deals in the future, once Iraq’s new government is sworn in.
Siemens had appeared to be in pole position to win orders in Iraq until the last few weeks, when the Trump administration put pressure on the country’s government to award more business to GE.
However, the German company made sure it would still be in the running for a share of future contracts after chief executive Joe Kaeser flew to Iraq on Saturday to sign its non-binding memorandum of understanding with Qasim Al-Fahadawi, minister of electricity.
Contracts to sell equipment to Iraq would not be expected to be very profitable but would be important wins for the struggling power divisions of both companies, which have been hit hard by the rise of renewable energy and slow demand growth in developed countries.
Musab Al-Khateeb, Siemens’ chief executive in Iraq, told the Financial Times the country was big enough for both companies. “No one company can handle all the infrastructure requirements,” he said, noting that GE supported 60 per cent of the Iraq’s power infrastructure.
GE said it was offering a “holistic” plan, including financing, local investments and training. Its 62.5 per cent-owned oilfield services company Baker Hughes is also offering technology for capturing gas burnt off in flares from Iraq’s oilfields, which could be used for power generation.
Russell Stokes, chief executive of GE Power, stressed the significance of its plan for quick deployment of 1.5GW of capacity. “We understand how important it is to deliver power immediately,” he said.
Iraq’s ministry of electricity said in a statement released by GE that the company’s action plan was “an ideal fit for our needs”, offering technology, financing and social services.
Siemens said its memorandum of understanding, if it became a contract, would “boost current generation capacity by almost 50 per cent” and ensure 23m Iraqis “have reliable and sustainable electricity 24/7”.
Mr Al-Khateeb said negotiations in the past few days had been intense, and had centred on details rather than political considerations.
“We worked on this from the bottom up rather than top down,” he said. “We locked in the procedural portion, the financing, and what the project budget would be over multiple years — and then we went for the MoU.”
Mr Kaeser also highlighted Siemens’ offer of a wider contribution to Iraq’s economy. “We promised them to achieve affordable and reliable power supply, help with anti-corruption, build schools and hospitals and create thousands of jobs,” he said.
Patrick McGee in Toronto and Ed Crooks in New York OCTOBER 21, 2018
Source: Financial Times,
https://www.ft.com/content/08485926-d52a-11e8-a854-33d6f82e62f8
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