Electricity Ministry Law 53/2017: private generation and solar plants
An investor considering a gas-fired plant or a solar farm in Iraq starts by asking what legal basis allows entry to the power market and with whom the plant will contract. The office of lawyer Ali Barakat in Baghdad, al-Yarmouk, explains, article by article, what the 2017 electricity statute (No. 53, Gazette issue 4443 of 17/4/2017) provides on these points.
The constitutional footing of the electricity sector
Article 114(2) of the Constitution makes regulation of the main sources of electrical energy and their distribution a competence shared between federal and regional authorities. A Kurdistan project is therefore also checked against regional legislation and bodies; elsewhere, this Law and the Ministry of Electricity are the first reference.
Objectives relevant to investors
Article 2 lists the Law's aims, three of which concern the private sector directly:
- regulating investment activity in building and rehabilitating power projects;
- regulating national and foreign private entry into new generating plants and distribution, with the legislative and institutional environment this requires;
- supporting and encouraging renewable energy in different fields and localising its industries.
A further aim is a gradual move from central to decentralised management of operation and maintenance of generation and distribution facilities.
The ministry's powers towards investors
Article 3 entrusts the ministry with signing partnership agreements with private operators in generation and distribution and bringing local administrations into such projects. Item ten casts the ministry as the body that recommends licensing a private company, Iraqi or foreign, that wants to add a plant or distribution network, working within state policy and alongside the national and provincial investment bodies. Item eleven adds setting the general rules binding public and private sectors that protect their interests and consumers', and monitoring compliance.
In practice a project file runs on two tracks: a recommendation from the Ministry of Electricity and a file with the competent investment commission. The licensing steps are covered in obtaining an investment licence.
Renewables and solar plants
Under article 9 the ministry, to promote investment in the sector, opens investment opportunities for private parties to build new generating plants and urges private sponsors toward plants fed by renewable sources such as sunlight, backed by whatever inducements are needed. The form and size of those incentives come from what the ministry announces for each opportunity, to the investment licence and to Investment Law benefits.
Restructuring and partnership
Article 8 allows the ministry to restructure its companies, turn them gradually into shareholding entities on a cabinet-approved proposal, and set partnership models with implementing mechanisms. Article 6 names the state generation, transmission and distribution companies that typically become the investor's counterparty for offtake or grid connection.
Offtake and tariffs
Article 10 makes contract the basis of dealings with the oil ministry and other counterparties: balanced agreements protecting delivery, take-up and payment, with sanctions for breach. Article 13 makes the companies self-financing, leaves the per-unit charge to ministerial instructions endorsed by the cabinet, and sorts users into classes by type of use, from homes to factories and farms. These provisions matter to a private generator because the buyer's ability to pay and the method for calculating the energy charge shape contract risk. Drafting for these risks is covered in drafting risks in power and large project contracts.
Legal basis and sources
- Constitution of the Republic of Iraq of 2005
- Ministry of Electricity Law No. 53 of 2017
- Investment Law No. 13 of 2006, as amended
Frequently asked questions
Can a foreign developer own a generating plant?
The Law contemplates it. Article 2(4) regulates national and foreign private entry into new generation and distribution.
Who grants the licence?
A ministry recommendation and an investment commission file together, under article 3(10).
Does the Law offer solar incentives?
Article 9 commits the ministry to promote renewable plants with inducements, detailed in each investment opportunity announcement.
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