Over the last six months, the stakes have risen in the process to procure a nuclear power station in Akkuyu, near the Mediterranean port of Mersin, a long-discussed project. In the latest step in February, Turkish and Russian delegations meeting at the Kremlin agreed a short declaration. It said that cooperation in the field of nuclear energy is an important part of their economic relations; that they are committed to further improve its ‘contractual-legal’ and technical framework; and that the Turkish party was glad that Russian companies showed interest in its civil nuclear programme. The declaration seems to increase the embarrassment factor for Turkey, should it choose to back out of the deal.
The declaration came at the end of a conference held in Moscow about nuclear power that featured the first vice-president of one of the partners in the Russian consortium bid, Timur Ivanov of Atomstroyexport. Ivanov said that the construction of a nuclear power plant in Turkey with Russian technologies and upon the terms offered at the tender would create a precedent of the build-own-operate model of private financing – when the state guarantees only the purchase of electricity. This experience, he said, can be applied under other projects in third countries.
Under the unusual terms of the tender, the Turkish government does not provide any investment guarantees. Instead, it guarantees to buy electricity at a fixed price per unit that is specified in the contract for 15 years, or up until 2030. After that, electricity can be sold at market rates, according to Atomstroyexport.
The Atomstroyexport consortium was the only one out of six bidders to return a final tender price in September. This could have been because the Turkish government did not provide any investment guarantees (see NEI November 2008, p8). The offer is for four 1200MWe VVER-1200 units, the latest manifestation of the VVER design, featuring the V-491 PWR reactor design with horizontal steam generators and a hexagonal fuel assembly.
The Russian-led consortium can afford to find its own financing because it is an arm of the Russian state. There are three partners in the consortium: Atomstroyexport, Inter RAO UES and Park Teknik, a subsidiary of the privately-held Turkish Ciner group. Atomstroyexport is Russia’s state-owned nuclear power plant vendor. Inter RAO UES is an energy exporting company that is also state-owned. Its assets include management contracts for one nuclear power plant (in Armenia) and other power plants in CIS countries.
For Turkey, nuclear power has long been a strategic priority. It has tried, and failed, to build its first nuclear power plant four times since the late 1960s, according to NEA News. The single four-reactor nuclear power station, when online, would increase the nation’s entire power production by almost 10% (based on 48.9GW total power production in 2006, according to the Intenational Energy Agency). The government plans for 20% of its power to come from nuclear sources by 2030, according to Park Teknik. This change would diversify its power supply away from coal.
“Turkey is a coal country,” said Turgay Ciner in a recent interview in magazine Turkishtime. Ciner is founder of the Ciner Group, the corporate owner of consortium partner Park Teknik. “You find lignite everywhere. You even find [it] in Istanbul.” But, he goes on to say, Turkish lignite produces less than a quarter of the amount of energy that natural gas does. On the other hand, coal is domestic; two-thirds of the natural gas is imported from Russia, according to NEA News. And the Russian consortium’s bid for the Akuyyu plant requires the use of Russian fuel, according to some sources.
So the Russian government has two good reasons to guarantee long-term loans to build a Russian nuclear power plant in Turkey, and elsewhere. First, it is supporting Russian industry in export of Russian nuclear technology. Second, those reactors will run on enriched nuclear fuel exported from Russia.
As part of the tender, the Turkish government does guarantee to buy electricity from the plant, at a fixed rate, for 15 years, or until 2030. The consortium and customer Turkish Electricity Trading and Contracting Company is currently negotiating that exact purchase price, given in US cents per kilowatt-hour. In January the consortium revised down its initial offer from the previous month, taking $1.55bn off the total value of the contract. The revision took into account ‘existing financial and economic situation in the world market,’ an Atomstroyexport statement said.
The total power output of the plant is estimated to be 415bn kWh over the first 15 years. At the consortium’s revised offer of $0.2079/kWh, the plant would make gross sales of $86.37bn over the 15-year contract, according to Park Teknik.
The next step is for the Turkish cabinet to make a final verdict.
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