The Turkish government is expected to soon announce who will be getting the lucrative deal, valued at $20-25 billion, to build the country’s second nuclear power plant in the northern province of Sinop. This would be the second power plant after a consortium led by state-controlled Russian builder Atomstroyexport was awarded a contract to construct Turkey’s first nuclear power plant, which is estimated to be around $20 billion, in Akkuyu in Turkey’s southern coastal province of Mersin.
Currently, companies from Canada, South Korea, China, Japan and France are all interested in winning the deal, and they have submitted their proposals to the government. My sources are telling me that Canada’s offer is not that competitive and will probably be left out of consideration unless an aggressive new offer is made by the company soon. The offer from South Korea looked pretty much the same as it was before when the Turkish government negotiated terms with South Koreans throughout 2010 before turning to the Japanese offer. The negotiations were suspended after the sides failed to work out key differences, particularly on the subject of state guarantees, financing and pricing issues.
When the talks with Tokyo Electric Power Co. (TEPCO), the Japanese power utility that is in charge of the disaster-hit Fukushima nuclear plant, and Toshiba fell apart after the incident, Turkey shelved the memorandum of understanding it signed with the Japanese government for the second plant. As Ankara started looking at other alternatives, Japan recently came back with another deal; however, this time with Japan’s Itochu Corp. and Mitsubishi Corp. Both companies partnered with France’s Gaz de France (GDF) and made a joint bid to the government. I was told the bid is very competitive.
The problem with this joint bid, however, is that there is heavy baggage that France brings to the negotiating table. France’s unacceptable position on the incidents of 1915 in a French bill that describes as genocide what occurred to the Armenians at the hands of Ottoman Turks in 1915-16 — a claim Ankara vehemently denies — and former French President Nicolas Sarkozy’s opposition to Ankara’s quest for EU membership have left a bitter taste in relations between Paris and Ankara. Although relations have somewhat improved with new President François Hollande’s recent overtures to Turkey, I would say the ties have still not recovered from those blows.
I recently asked Energy Minister Taner Yıldız about how much of a fair shot France has in Turkey’s nuclear power plant tender. He gave a very diplomatic response, saying that the level of current political relations with France cannot carry this very significant energy deal with Turkey. In other words, unless Hollande comes up with very fast and creative ways to upgrade ties with Turkey, he hinted that the French company has no chance of winning this deal. We saw in the past how GDF was locked out of a multi-billion dollar Nabucco pipeline deal that was designed to bring Caspian gas to Europe, bypassing Russia. Despite support from Romanian and Hungarian firms, Turkey opposed GDF’s participation. Hence, the Japanese support for GDF may be in vain in a nuclear deal as well.
To the surprise of many, China has come on strong in the competition game by offering another highly competitive bid to build the second power plant in Sinop. The offer was built on the Agreement on Cooperation for the Use of Nuclear Energy for Peaceful Purposes and a letter of intent on bilateral cooperation in the field of nuclear energy, signed by Prime Minister Recep Tayyip Erdoğan during his visit to Beijing in April 2012. China is a new player in the nuclear energy game but is a fast learner with 14 nuclear power plants in operation and 25 more under construction. It already has one project to build in Pakistan and sees Turkey as a chance to boost its credentials in the overseas nuclear energy market. Following the usual Chinese model of penetration into foreign markets, China can finance the building of the nuclear power plant in Turkey on its own and can even waive demands for government guarantees unlike the Russian deal. This makes the Chinese offer highly appealing to the Turkish government.
I also hear in the Turkish capital, both from the government side and from foreign diplomats that the South Koreans have come up with an innovative new deal. Rumor has it that the United Arab Emirates (UAE) can finance a second nuclear power plant in Turkey to be built by the Korea Electric Power Corporation (KEPCO). The reasoning was based on the fact that the UAE wants to be a serious investor in Turkey’s energy sector following a $12 billion deal the UAE’s Abu Dhabi National Energy Company made earlier this year with a Turkish state-owned company to mine lignite coal in the Afşin-Elbistan zone and build new power plants capable of producing up to 8,000 megawatts (MW) of energy in Turkey. In 2009, the UAE awarded KEPCO a $20 billion contract to build the UAE’s first nuclear power plant and can manage to work with the same company in Turkey as well.
Russia has shown interest in building the second one as well and in fact made some attempts in the Turkish capital to feel the pulse. But they have realized that the chance for that looks very dim because the government made clear it will not be giving away the second tender to Russia. Ankara does not want to rely only on Russia in nuclear energy alternatives and is keen to see the deal it signed with Moscow go through as planned. The construction of the plant was already delayed a year because of new and more stringent measures introduced after the Fukushima incident. According to Energy Minister Yıldız, 88 new safety revisions were added to the project, prompting more comprehensive surveys on the ground. The construction is scheduled to start in mid-2015, and it is expected that the facility will start producing electricity in 2019.
Of course, there is an anti-nuclear lobby in Turkey headed by Turkey’s main opposition Republican People’s Party (CHP). The CHP even appealed to the Constitutional Court to annul the government’s agreement with Russia on the 2010 deal for the nuclear power plant, but the appeal was rejected in 2012 by the court. Some argued that a power plant in Mersin, some 300 kilometers from the famous seaside vacation city of Antalya, would negatively impact the tourism and hospitality industry. There is no evidence of that. In fact, there are six nuclear reactors within 200 kilometers of Paris, four reactors within 200 kilometers of Madrid and nine within 200 kilometers of London. What is more, a nuclear power plant in Bulgaria is 400 kilometers from İstanbul, while another one in Romania is 370 kilometers from the same city.
It is hard to understand the opposition, though, considering that 13.5 percent of world electricity is generated from nuclear power plants. There are 442 nuclear power plants operating in the world with 61 more under construction. The share of nuclear power in electricity generation is 74 percent in France, 29 percent in Japan, 28 percent in Germany and 20 percent in the US. Government projections estimate that Turkey will need 500 kWh by 2023, the centennial of the foundation of the modern republic following the collapse of the Ottoman Empire. Turkey cannot meet this energy demand by simply relaying on renewable energy resources or expensive imported energy.
The target for the share of nuclear energy in Turkey’s electricity generation is 20 percent by 2023, and for that Turkey needs to build at least three nuclear plants. As the competition for the second one nears completion, existing bidders are also eying the third one.