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Nuclear energy deal still too expensive for Ankara
Russia turned up the heat on Turkey this week over long running and complex negotiations to build four nuclear reactors for a total of 4,800 MW of electricity generation. None other than Russian Prime Minister Vladimir Putin showed up in Ankara on Aug 6 to sign agreements on oil and gas pipelines and to salvage the long and much maligned nuclear deal.
The Financial Times of London reports that the latest round of negotiations involves Turkey taking a 15-25% stake in the nuclear project. In return Russia’s AtomStroyexport will reduce the price of electricity generated by the plant to $0.12/KwHr. The price of the reactors is included in a $21 billion deal that also covers transmission and distribution networks that could make Turkey a regional exporter of electricity.
Reuters reports that the delivered price of electricity from the deal is still too high to be viable in Turkey’s domestic energy market or in the region, but the final agreement has been signed by Sergi Kiriyenko, head of Russia’s atomic energy export agency and Zafer Alper, head of Turkey’s Atomic Energy Agency.
Will Turkey comply with its own tender?
Unfortunately, this new price will likely set off howls of protest domestically as it is still a third more than the price of electricity from natural gas. What makes the price reduction so significant is that the Russians started a year ago with an offer of $0.21/KwHr. The Russians have come a long way, but they’ve also squeezed concessions from Turkey in the process.
“In order to reduce the price to a reasonable level we’ve offered a state partnership,” Taner Yildiz, energy minister, (right) told the Financial Times. He said a state share of between 15-to25% would not imply any state guarantee for the project and that there was no intention of changing the terms of the tender.
The problem for both Turkey and Russia is that the published tender has explicit terms about the price of delivered electricity and a government guarantee to buy it at that price until 2030. Critics have pointed out that the deal is not only expensive, it also increases Turkey’s reliance on Russia for its energy needs.
Wolfgango Piccoli, an analyst with the Eurasia Group, told the Financial Times, “Questions over compliance with the tender and apparent political interference give the project’s opponents ammunition for serious legal challenges.”
Greenpeace activists protested the deal and the visit by Russian Prime Minister Vladimir Putin on Aug 6. About two dozen protestors showed up in downtown Ankara unfurling huge banners that said, “No atoms please.” They also used attention grabbing props representing classical Russian nesting dolls, but with the faces of Putin and Turkish Prime Minister Recep Tayyip Erdogan printed on them implying the nuclear reactors projects hold unpleasant hidden surprises.
Deal or no deal?
Turkey is still trying to get a viable price from the Russians. The latest “sweetener” is to offer to take an equity stake of 15-25% in the $21 billion project.
The tender calls for a “build-to-operate” deal with the vendor financing the construction and operating the plant. This latest offer from Turkey to swap equity for a cut in in the cost of electricity would reduce Russia’s capital requirements for the project by $3.2-to-5.3 billion.
Russia proposes to build four VVER PWR type reactors at 1,200 MW each near Mersin on the Mediterranean Sea. According to World Nuclear News, AtomStroyExport would lead construction along with Park Teknik of the Turkish conglomerate the Ciner Group, while Russia's Inter RAO UES would operate the reactors. The first reactor is expected to enter revenue service in 2016.
When Turkey first published the tender for the project more than two years ago, there were 13 potential bidders. Except for the Russians, the rest walked away because Turkey refused to accept their appeals for changes in the areas of protection of intellectual property and Turkey’s insistence on not using foreign workers to operate the plant.
Nuclear is not the only energy deal in town
Since then Turkey has also signed a series of energy deal with Russia for oil and natural gas pipelines.
The New York Times reports that during Putin's Aug 6 visit to Ankara, Russia and Turkey concluded energy agreements to support Turkey’s drive to become a regional hub for fuel shipments.
The deal reportedly will help Russia maintain a monopoly grip on natural gas shipments from Asia to Europe.
Turkey also granted the Russian natural gas giant Gazprom use of its territorial waters in the Black Sea. The company wants this route for its "South Stream" pipeline to gas markets in Europe.
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