BLOG ENTRY by Rik Teeuwen, Project Manager
In these last months, there have been loads of talks on the growing potential of doing business in Iran. Different national delegations visited the country trying to quickly reconnect old ties or establish new business relations, after international sanctions were finally lifted. The potential for Iran to be a strong trade partner is acknowledged worldwide, from USA to Europe to South Korea. The opportunistic approach of industries has led to an influx of MoUs around deals, or possible deals coming up. The renewable energy industry is no exception in this regard.
Recent press releases mentioned several multi-MW PV deals to be closed by little known Italian and German companies, as Solarplaza discussed in a previous article. Reality is many of these announcement will never result in the construction of an operational plant; most of these are destined to remain empty claims. This stems from a quite bullish approach to a new market. SUNA (the Renewable Energy Organization of Iran) came to the conclusion the process of awarding licenses has been too loose, and has started reviewing it. Up to this moment, licenses were applied for on a first come first served basis, with little regards to credentials and experience. Due to a lack of experience, skills and financing, a number of licenses were never followed-up. Very few projects have reached full fruition. For the future, it is to be expected that new licenses will be awarded to smaller facilities only, when developers can show relevant expertise, track record and skills. Developers whose projects are not making any progresses will risk to see their licenses revoked.
Announcement of stricter requirements from SUNA can be quite instrumental in the increase of announcements we saw over the last weeks. Developers feel the pressure of progressing awarded licenses, to move towards a PPA, securing financing and working through building and environmental permits. We believe partnering with companies that have skills and resources to develop projects in a tough market will provide the ingredients needed for the market to mature, mainly capital needs remain a well-known hurdle.
Since companies are forbidden to trade construction permissions or PPAs, there is a real push for valuable partnerships and joint ventures.
Keypoint in Iranian project development, as all over the globe, is the need for clear and concise financing plans. To reach a successful PPA a lot of work has to be put into attracting foreign investors. The local capital market has limited capabilities in project financing with interest rates over 20%. Foreign financiers can answer this need, where higher risk is met with rewarding returns, while their experience with RE project financing constitutes an asset and a solid base.
Foreign investors and developers that want to gain first hand insights and meet the key renewable energy stakeholders in Iran, should join us on our International Trade Mission to Tehran, that will take place from 16-20 October. We will offer the platform to liaise with (commercial) financial players in the dedicated Finance and Investment Workshop at the Ministry of Finance.