TURKISH NUCLEAR TENDER CANCELED

C O N F I D E N T I A L ANKARA 001698

SIPDIS

E.O. 12958: DECL: 11/24/2019
TAGS: ENRG PREL TU
SUBJECT: TURKISH NUCLEAR TENDER CANCELED

Classified By: DCM Doug Silliman for reason 1.4 (b,d).


1. (U) On November 20, the Turkish Electricity Trading and
Contracting Company (TETAS) canceled the September 2008
tender to build and operate Turkey's first nuclear power
plant. The cancelation follows a November 10 decision by the
Council of State (Danistay) to suspend several articles of
the regulation governing the tender, regarding land
allocation, determination of offtake prices,and necessary
bidder qualifications. Energy Minister Yildiz decided not to
appeal the decision and returned the tender documents to
TETAS rather than forwarding them to the cabinet, thus
allowing for the cancelation to be officially a bureaucratic,
not ministerial, decision.


2. (SBU) Problematic from the start, the 2008 tender
attracted only one bidder: a consortium of Russian
Atomstroyexport, Russian Inter RAO UES, and Turkish Park
Teknik. Negotiations between the GoT and the consortium
raised further problems. The GoT considered the consortium's
original offtake tariff offer of EUR 0.216/kWh too high, but
it was unclear whether tender specifications allowed
consideration of a later, revised offer of EUR 0.1535/kWh.
When Yildiz announced, following Russian President Putin's
August visit, that the GoT would take a 25 percent stake in
the project in return for a lowered price, observers objected
that more companies may have bid if these terms had been laid
out at the start. The government thus faced the threat of
lawsuits from companies if it went ahead with the 25 percent
partnership deal, as well as the threat of lawsuits from the
opposition if it went ahead with a deal at too high a price.
Concern about increased dependency on Russia for energy posed
another obstacle. Despite these multiple concerns, canceling
the tender was not an easy matter, given the close relations
between Russia and Turkey in various sectors. The November
10 Danistay decision apparently gave the government the final
excuse it needed to cancel the tender, but it remains to be
seen what repercussions will come from the Russians.


3. (C) The GoT now plans to move forward on two nuclear
plants at the same time: one in Akkuyu, the site of the
canceled tender, and one in Sinop. In conversations prior to
the cancelation, Ministry of Energy officials have toQ us
any new tenders would have a public-private structure,
completely different from the canceled tender. They also
assured us they would take into account the comments from
international companies on the problems of the September 2008
tender. On November 18, Yildiz told the ambassador he wants
the projects to begin in 2010 and may need "to break some
rules" to move quickly. When asked by the press about the
new tenders, Yildiz said, "let's not call it a 'tender
process' but a 'process.'" According to Faruk Demir, an
energy advisor close to the government, such comments may
allude to a plan whereby the GoT would create a new state
nuclear power company that would invite various foreign
private companies to take part in joint projects. On November
24, Nilgun Acikalin, deputy general director for energy
affairs at the Ministry of Energy, told econ officer and
specialist that whether the projects go forward through a
tender process or some new public-private structure, the
nuclear tender law will have to be revised significantly,
which will impede the minister's goal of getting the projects
underway in 2010.

JEFFREY

"Visit Ankara's Classified Web Site at http://www.intelink.s
gov.gov/wiki/Portal:Turkey"