Energy investors not happy about call to re-negotiate prices

(Photo: Envato Elements)
AMMAN — Minister of Energy and Mineral Resources Saleh Al-Kharabsheh’s letter to 29 renewable energy production companies requesting negotiations on decreasing the price of electricity has not been favorably welcomed by energy investors, saying the move would adversely affect the credibility of the sector for future national and international investors.  اضافة اعلان

According to a source at the energy ministry, NEPCO’s consumption of electricity produced through renewable energy has reached 26 percent. He said that under an agreement between the government and renewable energy producers the government buys electricity at a price ranging between 3.4 to 11.5 piasters/ kilowatt, “to be equally fair to all renewable energy companies as well as with NEPCO, in addition to creating an attractive and stable investment climate.”

Renewable energy investor Firas Balasmeh told Jordan News that the re-negotiation is “absurd.” He believes that this step has been taken to appease MPs regarding the controversy over the original energy agreements.

“I expect that it was directed towards the people and the parliament because they have been critical of energy agreements,” Balasmeh said. “Legally, there is no way that it will happen.”

Balasmeh said that he doubted the government could revisit and renegotiate a contract that has been in place for seven years and has another 13 years to expire, adding that this step would discourage investment in the renewable energy sector.

“How come after seven years you ask to renegotiate? I have loans from banks; I have obligations and a team. These were the prices at the time; you cannot compare 2012 with 2021; there’s a big difference in the prices between these years,” Balasmeh said.

Expert and economic analyst on oil and energy Hashem Akel told Jordan News that he welcomed this step and views it as positive. However, he asserted that the government and these companies must reach an understanding on amending the price of purchased energy from electricity production companies to benefit NEPCO. 

“Most sectors are complaining about the energy costs, so when there’s a decrease in electricity production, this would encourage more investments and promote competition, incentivizing economic growth and creating more job opportunities,” Akel said.

Akel said that the current prices are the outcome of errors in the contracts signed more than 10 years ago, when it was costly to produce power using renewable energy, adding that the agreement between the government and renewable energy producers was based on fixed energy prices. However, the agreement did not take into consideration that prices would drop down in the future. Therefore, according to Akel, the government should have included a provision, at the time of signing the agreement, ensuring the ability to amend prices commensurate with production cost.

“This is either ignorance or mismanagement, and both resulted in the same thing; high energy prices,” Akel added.

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