VZCZCXRO3225
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2902/01 2411417
ZNR UUUUU ZZH
R 291417Z AUG 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 3088
RUEKJCS/SECDEF WASHINGTON DC
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 002902 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958: N/A 
TAGS: IZ
 
SUBJECT: ELECTRICITY IN KURDISTAN REGION: AMBITIOUS PLANS, MANY 
PROBLEMS. 
 
This is a Kurdistan Regional Reconstruction Team (RRT) cable. 
 
¶1. (SBU) SUMMARY:  In an August 9 meeting with RRT Officers, 
Kurdistan Regional Government (KRG) Minister of Electricity Hoshyar 
Siwaily provided a candid overview of the electricity sector in the 
three provinces of the Kurdistan Region.  Consumers here currently 
receive on average eight hours of power per day from the grid with 
demand increasing 15 percent per year, businesses receive 24 hours. 
New gas-fired power plants under construction will help meet rising 
demand and consumer expectations for more electricity per day.  In 
the long term, however, the ministry must tap the region's potential 
for hydro power.  Doing so will require significant planning and 
capital, some of which will have to come from raising prices. The 
minister also rejected allegations that the KRG had been withholding 
power from the national grid.  The region lacks the controls center 
to do that and, even with the power from its two current hydro 
plants during the summer takes power from the grid.  END SUMMARY. 
 
--------------------------------- 
KRG: A Net Consumer from the Grid 
--------------------------------- 
 
¶2. (U) Only the provinces of Erbil and Sulaymaniah depend on the 
Iraqi national power grid. Dohuk receives its power from Turkey but 
it is very expensive ($.033/kwh).  Currently two power plants 
operate in the KRG; both are hydroelectric power plants at Lake 
Dukan and Lake Derbandikhan, both in Sulaymaniah Province. These 
plants together are capable of generating approximately 300-400 MW 
during the summer months when conditions permit, i.e. sufficient 
rain during the winter months.  This hydro power is transmitted 
through Iraq's national grid but most is distributed back to the 
provinces of Erbil and Sulaymaniah. 
 
¶3. (SBU) The minister emphasized that the region remains a net 
recipient of approximately 200 MW from the national grid, which is 
sufficient to provide approximately 8 hours of electricity to 
residents in Erbil and Sulaymaniah.  This amount of electricity 
drops significantly during the winter months when the two 
hydroelectric dams are storing rain water for the next agricultural 
growing season. 
 
¶4. (SBU) As a net recipient of power from the grid, the minister 
complained about allegations contained in the August 5 Associated 
Press report that the KRG was withholding power.  In fact, he 
claimed that the national grid was providing 150 MW instead of the 
usual 200 MW during the month of August.  He also noted that, even 
if the KRG wanted to remove itself from the grid, it lacked the 
independent control and distribution system to do so. All the power 
for the two provinces was linked to the control center in Kirkuk. 
 
-------------------- 
Plans for New Plants 
-------------------- 
 
¶5. (SBU) Meeting rising demand and increasing the amount of power to 
the consumers is the Ministry's first priority.  "We've got to show 
the people something," he commented.  The Ministry has two new 
gas-powered generation plans in an advanced stage of construction: 
the Pir Daud 500 MW plant in Erbil and the Taq-Taq 750 MW plant in 
Sulaymaniah.  Both are being constructed under BOO (buy, own, 
operate) contracts between the KRG and a local investor, Ahmed 
Ismail, through his company MAS-Jordan.  The KRG will be obligated 
to buy the power generated by these stations for $0.028 / kwh for 
Pir Daud and $0.029/ kwh for Taq-Taq [note kwh = kilowatts per 
hour]. The long-term economics of the deal are unknown since the 
capital requirements appear to be higher than the income potential. 
 
¶6. (SBU) The first half of the Erbil power plant is expected to be 
completed in early 2008 and will be able to generate 250 MW.  The 
Sulaymaniah Taq-Taq plant is scheduled to bring 250 MW online by 
July 2008.  Both power plants will be dependent upon the 
availability of natural gas.  The KRG signed a deal with the Dubai 
based DANA to build a gas pipeline from the gas fields at Chamchamal 
to both plants.  Construction is underway and is scheduled for 
completion in March 2008.  In order not to delay the opening of the 
Pir Daud plant in early 2008, the KRG is stockpiling diesel fuel to 
run the plant temporarily until the gas pipeline is finished.  When 
the first stages of both power plants are completed next summer, the 
Ministry of Electricity estimates that the power generated will be 
sufficient to provide residents of Erbil and Sulaymaniah Provinces 
with 16 hours of electricity per day year-round. 
 
¶7. (SBU) The inister acknowledged that the central government is 
opposed to the DANA gas deal but noted that the Chamchamal gas 
fields were within KRG territory, the gas was not being sold, and 
that power generated by the plants would contribute to the national 
distribution system.  He also noted a lack of coordination between 
the gas pipeline project and the construction of the two plants.  If 
 
BAGHDAD 00002902  002 OF 003 
 
 
the pipeline is not completed before the summer, he will have two 
plants with nothing to fire them. 
 
¶8. (SBU) The Ministry has also signed a deal with a U.S. registered 
company JACO for construction of a heavy-fuel powered 260 MW plant 
in Dohuk.  Preliminary site-grading and construction is now underway 
after a delay caused by the company's failure deposit the $3 million 
performance guaranty required by the contract.  Officials in Dokuk 
said August 22 that they expect this plant to be ready to generate 
100 MW by Spring 2008. The ECD is dependent on the signing of the 
contract and dates for mobilization. 
 
------------------------------------ 
Tariff increases, Long-term planning 
------------------------------------ 
 
¶9. (SBU) The Minister clearly recognizes that delivering more 
electricity to KRG citizens is a long-term and expensive process. 
His ministry is hampered by extremely low tariff rates which greatly 
limit their ability to raise capital to upgrade, maintain, and 
expand the electrical generation, transmission, and distribution 
system within the KRG.  The Ministry has submitted a request to the 
KRG Council of Ministers for an immediate tariff increase in 2007 
and annual increases until 2010.  If the immediate increase is 
approved, the cost for KRG residents will rise from $0.004 to $0.01 
per kwh.  The increase will not generate much revenue, but will, the 
minister hopes, introduce consumers to the idea of paying the 
government for electricity.  Right now consumers pay significantly 
more to private generators operators but balk at paying for 
government power, business customers pay slightly more.  The 
Minister noted that substantial further increases will be needed to 
cover the true costs of electricity generated by Pir Daud and 
Taq-Taq.  Since management, transmission, and distribution costs 
must also be factored into the tariff, he expects that the KRG will 
have to eventually charge $0.05 or $0.06 per kwh.  This price will 
still be significantly cheaper than residents currently pay to 
small, neighborhood, privately operated, diesel-powered generator 
enterprises. 
 
¶10. (SBU) According to the minister, what is really lacking now is 
long-term planning.  The KRG Ministry of Electricity is a brand-new 
ministry, cobbled together from parts of the Ministry of Industry 
and unified under a single minister only one year ago.  The 
challenges facing this ministry are further hampered by a lack 
trained staff and an inability to undertake the analyses critically 
needed to forecast growth of consumer demand, plan strategically, 
and justify tariff increases. The future lay in tapping the region's 
hydro-electrical potential, but to date, no feasibility studies have 
been completed.  It will be years before such long-term, capital 
intensive projects come on line. 
 
--------------- 
U.S. Assistance 
--------------- 
 
¶11. (U) Technical Reinforcements:  The ministry is currently 
receiving technical assistance from USAID through the provision of a 
single long-term expatriate advisor.  However this advisor has been 
given the herculean task of developing a comprehensive Electricity 
Master Plan for the KRG covering planning, generation, transmission, 
least-cost generation, and tariff reform/restructuring.  Given the 
immediate needs of the ministry to raise tariffs and negotiate 
additional contracts to increase the supply of electricity in the 
KRG, the Minister requested that USAID assign additional experts in 
order to complete this mammoth and complex study in a timely 
fashion.  USAID had responded by hiring another electricity utility 
expert for six months. 
 
¶12. (U) Training Center: There are currently five training centers 
in Iraq that are used to train Central Ministry and provincial 
employees of the Ministry of Electricity.  These centers are located 
in Basra, Najaf, Basil, and two in Baghdad.  The KRG Ministry no 
longer has access to these centers for its staff and is requesting 
US help with the establishment of a training center for the KRG. 
This will train employees on the operation and maintenance of the 
systems used in their areas, as well as on administrative and 
management skills. 
 
¶13. (SBU) Control Center: The Minister also requested US help with 
the construction of a $3 million control center for the KRG. 
Currently, all electrical generation is controlled by an existing 
center in Kirkuk.  The minister would like to have a center which 
would be linked to the SCADA (system control and data acquisition) 
systems for the new Pir Daud and Taq-Taq plants.  This will allow 
the KRG ministry to monitor electrical generation and distribution 
in real time and make operational adjustments in their system to 
distribute power more efficiently and effectively.  Comment: This 
concept is not recommended by the electrical experts in ITAO.  The 
 
BAGHDAD 00002902  003 OF 003 
 
 
National Dispatch Center and the North, South, Center Regional 
centers report to the National Dispatch Center.  He asserted that 
the GoI Ministry of Electricity supports this idea.  Some might see 
such a center as a means for the KRG to move off the national grid. 
End Comment. 
 
¶14. (SBU) Feasibility studies: The water flowing in Kurdistan's 
mountains may be the region's future for electrical power, but the 
ministry has not a single feasibility study to show potential 
investors or donors.  He asked whether the USG could help by 
studying two or three potential sites to jump start the process. 
 
 
¶15. (SBU) Comment: Minister Siwaily conveyed a sense of technical 
competence and political realism in facing the enormous task of 
scrambling to meet current demand and planning for the future with 
limited resources at his disposal.  RRT and USAID will be looking at 
his requests within our programs and resource during the coming 
weeks, but have already moved to bring in additional technical 
assistance. 
 
CROCKER