Small-town Norwegian solar company Saga Energy has signed a €2.5bn (Nkr23bn) deal to build solar power plants in Iran.
The preliminary agreement, which is still dependent on finding financing, is with Iran’s state-owned Amin Energy Developers and comes on the heels of US President Donald Trump tightening his policy towards the Middle Eastern country.
“The agreement between Amin and Saga is to build 2GW of solar power plants on a high number of sites to strengthen the national grid,” Rune Haaland, spokesperson for Saga, tells GTR.
“A key element is to help Iran to fulfill its responsibilities according to the Paris climate agreement. The first step will be to build 180MW capacity on government land,” he says, adding that the companies also intend to build a solar powered PV panel factory using robotics and employing Iranians to operate the factory.
The contract, claimed by some Iranian media as the second biggest deal since the lifting of sanctions last year, has received much attention from both local and international media. However, the young Norwegian company, which was established only last year, is yet to secure financing for the job, despite reports that deals, including Norwegian state guarantees, were in place.
“We do have contact with a couple of European banks and also investment funds. No choices have been made yet. The ministry of finance in Iran have confirmed that two Iranian banks are able to do international transfers at the moment,” says Haaland.
A spokesperson at the Norwegian export credit agency Giek confirms that it has “not issued any guarantees connected with Saga”.
European businesses have shown great interest in entering the Iranian market, but remaining US sanctions and escalating rhetoric from Trump have created an environment of greater uncertainty, leaving many investment plans stuck at the planning phase with banks reluctant to get involved.
Financing deals with Iran remain few and far between. Last month, Austria’s Oberbank and Denmark’s Danske Bank each entered into framework agreements with a number of Iranian banks, under which they will provide financing for Austrian and Danish companies exporting to Iran. These two banks were reportedly the first European banks to enter such financing agreements in Iran.
There have been some notable investment deals, however. France’s Total, for example, signed a US$5bn gas deal this summer with China’s CNPC. Other firms such as French car makers Renault and Peugeot have numerous investments in Iran.
And last month Quercus, a UK-based renewable energy investment firm, announced the launch of a 600MW solar photovoltaic plant in the central region of Iran, committing to invest more than €600mn into what will be one of the largest solar plants in the world.
Saga Energy is a relatively small and young company formed by former oil and gas project managers and engineers who shifted into the renewables.
Plummeting oil prices have pushed Norway, where oil and gas-related sectors make up around 75% of the country’s exports, to rethink its future and its exporting strategy.
Earlier this year the Norwegian government put forward a new industrial initiative – the first such plan since 1981. The plan aims to address the opportunities and challenges the country is facing “as a result of climate change, new technology, robots and digitisation”, by being “more innovative, smarter and greener” and ensuring its businesses have the right export conditions to be competitive.
On the green front, Norway plans to pursue an aggressive policy towards becoming a low-emission society. Despite its abundance in fossil fuel reserves, Norway has for long powered its domestic market predominantly with renewable energy, giving it an important competitive advantage. The government is now focused on exporting this expertise to the rest of the world.