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Iraq's Electricity Sector: Ministry of Electricity Law No. 53 of 2017, IPPs, PPAs and Solar Projects

Iraq's electricity sector remains dominated by the state, but the Ministry of Electricity Law No. 53 of 2017 expressly provides for private investment in generation and distribution and for renewable energy. Private power projects are structured as independent power producer (IPP) arrangements with the Ministry as offtaker, licensed through the investment commissions. This article explains the legal basis, typical contract structure, recent solar developments and the points foreign investors should test.

Othman Al-JubooriOthman Al-Juboori, Iraqi lawyer, expert in Iraqi labour lawIraqi lawyer, expert in Iraqi labour law Current as of October 2026

The statutory framework

The Ministry of Electricity Law No. 53 of 2017, published in the Official Gazette (Al-Waqai Al-Iraqiya No. 4443, 2017), established the Ministry of Electricity on a statutory footing and replaced the earlier arrangement under a dissolved Revolutionary Command Council decision. For investors, the key provisions are:

  • Objectives (Article 2) these include organising the entry of the national and foreign private sector into investment in generation and distribution, providing the necessary legislative and institutional environment, and supporting renewable energy and localisation of its industries.
  • Tasks (Article 3) the Ministry concludes public-private partnership contracts in generation and distribution (item Sixth), organises the participation of local governments in investment and partnerships (item Seventh), and recommends the grant of licences to national and foreign private companies to build generation and distribution facilities, in coordination with the National Investment Commission and governorate investment commissions (item Tenth).
  • Reform (Article 8) the Ministry may restructure its companies, implement plans to convert them into joint-stock companies, and develop models for public-private partnership.
  • Investment (Article 9) the Ministry opens investment opportunities for the private sector to build new generation plants and encourages private investment in renewable energy plants, "with the necessary incentives".
  • Relations with the Ministry of Oil (Article 10) the relationship between the Ministry of Electricity, the Ministry of Oil and other bodies is to be organised on a contractual basis, through balanced contracts securing supply, receipt and payment with penalty clauses.
  • Tariffs (Article 13) the selling price of electricity is set by instructions issued by the Minister after Council of Ministers approval, with consumption classified as residential, commercial, industrial, governmental and agricultural.

The law creates no independent regulator. Draft legislation for a separate electricity regulatory authority has been discussed for years but, at the time of writing, we did not locate an enacted law. The Ministry therefore remains policymaker, operator of the state grid and offtaker at the same time.

The Kurdistan Region has its own Ministry of Electricity and power projects there follow regional procedures and the Kurdistan Investment Law No. 4 of 2006.

Licensing a private power project

Power plants are investment projects, so the Investment Law No. 13 of 2006 governs licensing and incentives. Under Investment Regulation No. 2 of 2009, as summarised in the U.S. Commercial Law Development Program's legal guide, power projects with capacity of 30 MW or more fall within the NIC's exclusive jurisdiction as federal strategic projects, while smaller projects may be licensed by governorate commissions. The Ministry of Electricity's recommendation under Article 3/Tenth of Law No. 53 is an essential part of the process.

A licensed project may benefit from the Investment Law's 10-year tax and fee exemption from commercial operation (Article 15) and customs exemptions on imported project assets (Article 17), subject to their conditions. Oil and gas extraction is excluded from the Investment Law, but power generation is not.

How IPP contracts are structured

In federal Iraq, private power projects generally follow an IPP model in which the Ministry of Electricity is the sole buyer. Key features described in the CLDP guide include:

  • Energy conversion structure for thermal plants, the Ministry of Oil supplies fuel, and the power purchase agreement (PPA) is structured so that the investor converts fuel into electricity for a capacity and energy payment. Fuel supply risk sits with the government side.
  • Payment security because the Ministry's revenues depend on low, subsidised tariffs and high losses, lenders focus on payment security. The guide notes that the Ministry of Finance may provide sovereign guarantees for certain power projects, which in some cases has required parliamentary involvement.
  • Immunity Iraqi government counterparties tend to accept a waiver of "judicial immunity" in connection with arbitration rather than using the term "sovereign immunity".
  • Dispute resolution international arbitration is common in large energy contracts with foreign parties. Iraq's accession to the New York Convention (in force from 9 February 2022) and membership of the ICSID Convention (in force since 17 December 2015) are relevant to enforcement planning.

Not every project is a pure IPP. The Ministry also signs engineering, procurement and construction contracts and long-term service agreements with equipment manufacturers for state-owned plants, often supported by export credit financing. These are public contracts subject to the government contracting instructions discussed in the next article.

Solar and renewables

Renewable energy is an explicit objective of Law No. 53 (Articles 2 and 9). Recent developments, as reported by the parties and by industry press, include:

  • Basra 1 GW solar project part of the Gas Growth Integrated Project led by TotalEnergies with QatarEnergy and Basra Oil Company, under agreements first signed in 2021 and finalised in 2023. The Ministry of Electricity announced trial operation of the first 250 MW unit at Artawi (Ratawi), Basra, in March 2026.
  • Other 1 GW programmes Iraq has reached initial agreements with ACWA Power and Masdar for solar capacity in several governorates; as of August 2026 these were reported as initial rather than final agreements. Another developer awarded a similar project later announced its withdrawal, reportedly in part due to slow contract finalisation.
  • Policy targets in August 2026 a Ministry spokesman was reported as describing plans to add 10 GW of solar capacity. Government targets have shifted over time, and investors should rely on executed contracts rather than announced targets.

The NIC has also issued calls for expressions of interest for solar IPP projects. Investors should confirm whether a given opportunity is tendered competitively or negotiated directly, as this affects both process risk and later scrutiny.

Workforce and labour law

Power projects licensed under the Investment Law must give priority to qualified Iraqi workers and train Iraqi staff (Article 14 of that Law), and the National Investment Commission takes into account that local labour is not less than 50% of the total workforce of the project (Article 30/First of Investment Regulation No. 2 of 2009). Expatriate engineers and technicians need work permits under Instructions No. 1 of 2026 (Official Gazette No. 4863): a 15-day labour-market test applies and in technical projects foreign workers undertake to train Iraqis (Article 11), while in the Kurdistan Region Council of Ministers Decree No. 172 of 2022 requires at least 75% local staff. In 2024 the Council of Ministers decided that private-sector companies and companies contracted with the Ministry of Oil must employ at least 80% Iraqi staff, and the Ministry of Labour has stated that it applies this 80/20 ratio (INA, 3 December 2025; 964media, 28 September 2026); we have not seen the published text of the Cabinet decision, which practitioners cite as Decision No. 24832 of 2024. The ratio to plan on is no more than one foreign worker for every four Iraqi workers. Under Social Security Law No. 18 of 2023 the employer pays 12% (in addition to the employee's 5%) and also bears the State's 8% share for foreign workers, and where a state body pays a contractor, it may not release payments without a social security clearance (Article 21). See our articles on work permits for foreign workers and social security for employers, and our labour law page.

Points to test before committing

  1. Offtaker credit and payment route how payments flow, in what currency, and what happens when budget appropriations are delayed.
  2. Guarantee instruments whether a sovereign or Ministry of Finance guarantee is available and what approvals it needs.
  3. Grid connection who builds and pays for transmission lines and substations, and the consequences of curtailment.
  4. Land title, lease terms under the Investment Law and any competing claims.
  5. Change in law and tariffs protection against tariff reform, new taxes or changes in fuel supply arrangements.
  6. Staffing Iraqi hiring and training obligations and expatriate permits (see our labour-law series).

Frequently Asked Questions

Can a foreign company own a power plant in Iraq?

Yes, through an investment licence and a project company or branch. The structure, land rights and ownership at the end of the licence term are set by the licence and project agreements.

Is there an electricity regulator?

No independent regulator has been established by law at the time of writing; the Ministry of Electricity exercises policy, operational and purchasing functions.

Who sets the price paid to an IPP?

The tariff paid to an IPP is set in the PPA. Consumer tariffs are set separately by ministerial instructions approved by the Council of Ministers under Article 13 of Law No. 53.

Sources

This article is general information, not legal advice.