Turkey's energy dependency on Russia to rise after nuclear plant

Wednesday, October 1, 2008

Turkey faces the risk of becoming heavily dependent on Russia uranium if the recent tender for Turkey's first nuclear power plant, won by a Russian firm led consortium, is not canceled, analysts say.

Turkey's energy dependency on Russia to rise after nuclear plant

"The tender for the nuclear plant was held in order to lessen the Turkey's energy dependency to Russia, but if it is approved Turkey's dependency to Russia will be even greater," Necdet Pamir, an energy expert, told HotNewsTurkey.

A consortium led by Russian state firm Atomstroyexport, together with Inter RAO and Turkish Park Teknik, was the only bid in a tender to build and operate the country's first nuclear power plant.

The tender was disappointing given the fact that a number of foreign and local companies had previously expressed interest but did not submit bids, making the Russian consortium the sole bidder.

The technology used by the Russian company works only with uranium enriched by Russia, Referans daily reported, posing the risk that Turkey's dependency on Russia would increase, adding a demand for uranium to the country's current natural gas demand.

Russia already provides more than 60 percent of Turkey's gas imports. Turkey, a net importer of gas and oil, imports nearly 67 percent of its total supply needs, a figure that is expected to reach 75 percent by 2020. In the next few years, the country's energy demand is set to rise by 8 percent annually.

Analysts also have pointed out that the tender cancellation was possible. "The tender will be cancelled and I suggest a 99 percent likelihood of this happening," Pamir said.

Wolfango Piccoli, from Eurasia Group also anticipated that the tender would be cancelled, saying it remained to be seen whether the government would decide to launch another tender or to build the nuclear plant itself through a public-private partnership.

The cancellation of the tender also may force the government to go back to the drawing board to ensure more participation in future tenders due to the confidence blow struck in the tender on Sept. 24, analysts said.

Despite calls for a postponement by various potential bidders, the Energy Ministry rejected requests from four potential bidders to extend the deadline to allow companies to prepare for the auction.

"This has created a loss of credibility in the government that couldn't be prevented. It won't be easy either to regain confidence after this one," Haluk Direskeneli, an energy analyst, was quoted by Reuters as saying.

If the tender is called off investors would expect the government to change some of the legislation linked to it, such as treasury guarantees on investor credit and more balanced sharing of risk in pricing power from the plant, analysts have estimated.

They also criticized the tender process harshly and said it was poorly and hastily prepared and the tender documents were not sufficient in nature. "These are not standard, commercially acceptable, market approved tender documents, or better so-to-speak invitation," Direskeneli also said in a separate statement.

Analysts also say despite the fact that the AKP government has insisted for a long time that the solution to Turkey's energy demand for power lies in nuclear energy, the last minute changes in the invitation such as insurance, counter guarantees, financing credibility, waste management were some of these missing issues.

"The government keeps pushing ahead with large tenders ... but there is so much to be changed in the legislation that regulates these tenders to make both investors and the government happy," Pamir also said.

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