Power Machines Wins Iraq Deal

Power Machines, the country's biggest energy machinery producer, announced Thursday that it would build a 26.8-megawatt hydrostation in northern Iraq by July 2010, raising hopes for other Russian firms looking to re-enter the country.

Financial terms for the deal would not be disclosed, Power Machines said in a statement, although an analyst estimated that it was worth $16 million to $18 million. Originally signed in 2001, the contract was suspended shortly after U.S.-led troops toppled Saddam Hussein in 2003.

"Iraq is rich with hydro- and thermal-energy resources and has a huge potential," Farid Dyomin, head of Power Machine's department for the Middle East and Africa, said by telephone. "Experts estimate that Iraq now plans to build 3,000 megawatts [of capacity] per year, and we want to take an active role."

Construction of the Al-Adayim station marks one of Russia's first steps back into Iraq — where it had a significant presence, particularly in the oil and gas sector — before the invasion.

In March, then-President Vladimir Putin called on Iraq to welcome investment from Russian firms the same day LUKoil chief executive Vagit Alekperov traveled to Baghdad for talks on reviving a $3.7 billion prewar concession for the West-Qurna-2 field.

Last month, LUKoil and Gazprom were among 35 energy majors the Iraqi Oil Ministry shortlisted as eligible to submit tenders to develop six of the country's rich oil fields and two gas fields.

"The contract for Al-Adayim was frozen and supplies were suspended. The turbines and generators that were already built were kept in the warehouses until recently," Power Machines said in the statement. The remaining machinery will be produced at Power Machines' facilities in St. Petersburg and sent to Iraq in the next three months.

Alfa Capital fund manager Semyon Birg estimated that the deal was worth $16 million to $18 million, or $600 to $700 per kilowatt.

Power Machines, controlled by Russia's second-wealthiest person, Alexei Mordashov, has two other projects in the country.

In March 2004, it began construction on the 320-megawatt Debis thermal power plant in Kirkuk, which is scheduled to be completed by 2009. Work there has been halted several times because of financial and security problems.

Dyomin said the company was in talks to resume work at its other project, the 256-megawatt Makkul hydrostation, which suspended indefinitely after the invasion. That contract has been estimated at 77 million euros ($122 million).

Several hundred employees of Russian companies left Iraq after the invasion. But now, as the country is looking to attract foreign investors to rebuild its war-torn economy, Russian companies are flocking back.

In February, Russia canceled $12 billion of Iraq's debt, or 93 percent of the total, which was followed by the signing of a memorandum of cooperation.

Finance Minister Alexei Kudrin said at the time that Russian companies could invest as much as $4 billion in Iraq.

LUKoil chief executive Vagit Alekperov visited Baghdad in March to discuss reviving its concession at the West-Qurna-2 field, which it estimates holds around 6 billion barrels of oil.

Calls to the Russian Embassy in Baghdad went unanswered Thursday.