Increasing VFM in PPP power station projects – Case study: Rudeshur gas turbine power station

In the past, public sector most often invested in power station projects, however, rapid increases in electricity demand, especially in developing countries, and limited financial resources of governments have recently led them to resort to private sector investment. Furthermore, increasing Value for Money (VFM) of the output/service through using the advantages of private sector efficiency is highly sought. To achieve these objectives, long-term partnership between the public and the private sector entities through Public Private Partnership (PPP) agreements are used. In the ideal PPP, risks should be allocated to the party who is the best entity to manage them in the most cost-effective way. Rudeshur gas turbine power station case study, this research explores how and to what extent the Iranian Government (IG) could achieved the above-mentioned objectives. While Rudeshur agreement can answer IG’s urgent need for electricity demand in short-term, due to poor market and revenue risks allocation, it cannot contribute to competitive market conditions and thus, cannot achieve VFM in long-term by contracting such the Rudeshur agreement.