Iraq to issue letters of credit for GE, Siemens

BAGHDAD, Feb 25 (Reuters) - The Iraqi government plans to issue letters of credit soon to cover part of the costs of two giant electricity contracts signed with Germany's Siemens AG (SIEGn.DE) and U.S. company General Electric Corp (GE.N), a government spokesman said on Wednesday.

Government spokesman Ali al-Dabbagh said the aim of issuing the letters of credit was to speed up the delivery of gas turbines but at the same he reaffirmed the government's intention to potentially cut the cost of the contracts.

Planning Minister Ali Baban also repeated on Wednesday a statement that the two contracts were under review as the Iraqi budget comes under severe strains due to low oil prices. More than 90 percent of Iraq's revenues come from oil exports.

"We will try to get better terms from the two companies and will ask them to consider our fiscal status when the time comes to pay," Baban told Reuters.

"We will try to clarify some points. We may add some points or amend or lower the value of the contracts and this is one of the targets."

Iraq signed the 1.5 billion euro ($1.93 billion) deal with Siemens for 16 gas turbines and a $3 billion deal with GE for 56 turbines last year.

The electricity contracts are a major part of Iraq's drive to end chronic power shortages that are a serious handicap for Iraq's economy -- and a major problem for everyday life -- six years after the U.S.-led invasion.

Dabbagh said the cabinet had agreed to issue letters of credit to get the delivery of the turbines started.

The first, for Siemens, would be for 890 million euros. The second, for GE, would be for 576 million euros and $248 million dollars, he said in a statement.

"This was decided due to reservations shown by the Iraqi Central Bank about using a treasury bond to finance the contracts," Dabbagh said.

"The purpose of extending these letters of credit is to speed up the building of the gas power stations for the purpose of meeting domestic energy demands." (Reporting by Khalid al-Ansary and Ahmed Rasheed; Writing by Michael Christie; Editing by Sue Thomas)