Iran Infrastructure Report Q4 2008

Major news from within Iran's power infrastructure over the last quarter has centred on moves to increase private participation in Iran's power sector. In July 2008, the country's Ministry of Energy announced that it was in the final stages of privatising 10 power plants. By March 2008, the Ministry aims to have handed over 80 plants to the private sector as it seeks to reform the power industry and increase capacity.

It is not only operational power plants thaTWh are seeking private investors. In August 2008, the BBC reported that the governor of the Khuzestan Province had announced development plans for eight electricity power plants, with a combined capacity of 6,000 megawatts (MW). These plants are to be released in partnership with the private sector.

Iran hopes that privatisation will help attract investment increase efficiency and encourage the sector to compete in international markets. In addition, by ending direct involvement in the power sector, as well as many other industries, Iran is hoping to qualify eventually for membership of the World Trade Organisation (WTO). However, previous auctions of state industries have not attracted many suitors owing to complaints that assets were over-valued.

Despite generating a surplus of electricity, Iran is still susceptible to power cuts. This is due to a lack of diversification in the power sector. Iran is heavily reliant on gas, and the fuel is expected to make up 78.4% of the country's total power mix in 2008. To combat this, the government has developed a hydropower sector. Poor rainfall in the summer, though, led to a drop in water levels at hydro-power facilities, resulting in intermittent power outages. Iran is already implementing measures to further diversify its power sector, in the shape of the controversial US$1bn Bushehr nuclear power station, which the country is developing with Russia.

The trend in the development of Iran's transport infrastructure continues to focus on the construction of railways in the country. Iran is one of the few Middle Eastern states to have developed a railway system.

New announcements for this sector over the last quarter have included news on a deadline for the Armenia-Iran rail link. In October 2008, Armenian Minister of Transport and Communications Gurgen Sargsyan announced that the planned railway to link Armenia with Iran will take five years to build. The cost of the project is estimated at US$1.5-2bn. The completion date for the Khorramshahr-Shalamcheh section of the Iran-Iraq railway line was also announced and is set for March 2009. The Iran-Iraq railway will link Khorramshahr on the Iranian side with Basra in Iraq. The total length of the line will be 37km, with 25km of track in Iraq and 12km in Iran.