Saturday, January 03, 2015

"Fury" (Rage) film, Sherman and T-34 battle tanks in WW'2


Dear Readers,

"Fury" movie, has already became a new cult masterpiece. It contains scenes difficult to watch. It is not for everyone, since the brutality of war is very difficult to watch. Battle tank manufacturing is within mechanical engineering discipline. Automotive is the highest point of mechanical engineering as the excellence of science of art. You must keep the driver and the crew safe at all times. Tank should be the leading deterrent of attack power. You should be able to drive on off-road terrain at least 50-60 km an hour. You should be able to identify the enemy quickly, aim/ shoot/ hit the enemy while your tank is in motion. You should produce that capacity all within 5-6 million US dollar budget per tank in today's prices. These are not easy tasks, but we have to fulfill that capacity in order to survive in our geography.

The major character in US production "Fury" (rage) movie film was the Sherman tank, which was nick-named by the soldiers in time of war as "death trap", when hit, burning quickly, and killing the crews inside by fire. In order to kill a German Tiger tank, at least 4-5 Sherman were spared. Burn to death was the fate of tank crew in WW2. It was sad story of American soldiers entering into the tank by accepting the death by burning from the start.

In fact, the choice of Sherman tanks by American generals at the start of WW2 was a wrong decision. Anyhow wrong or correct, the decision was taken, and Sherman tanks were manufactured in 5-different plants in war almost 50,000 units. It had initially 400 hp petrol firing rear engine, easy to get burned when hit. Due to these dissatisfaction, production is stopped right after the war, the rest were sent to other countries.

We must learn the story of the legendary T-34 tanks of our northern neighbors. Wheel suspensions, and walking pallets were copied from American "Walter Christie" design. Sample Caterpillar tractors were secretly exported to Russia in the 1930s. Tank transmissions were copied from American tractor undercarriage. Tank engine was at the rear, it was water cooled, diesel fuel firing, BMW of German design. T-34 tank had easy maintenance easy repair, with no major operation problems. They had easy maneuver capability in field rides. Cold start of the engine was excellent but transmission was disaster. Their inclined armor were covered with special alloy for protection. Bullets were bouncing on inclined armor and bullets did not work. Two spare fuel tanks externally mounted on tank body rear, needed to pass long distances. During fighting with enemy, fuel tanks were immediately dismantled from the tank body.

Design and early production of T-34 tanks were kept top secret. First bunch of 1000 units were ready for fight against the invading German forces for the first time in Kurtz tank war. Germans were expecting their enemy to have inferior poor design tanks, but just the opposite have happened. German tanks faced with new design, powerful, fast, durable, technological monsters on the war theater. Germans suffered in a great surprise.

Germans thought that their enemy had poor, inferior, undeveloped technology which could be beaten easily. It was happened just the opposite in war theater. Germans were defeated heavily in the clash with new design T-34 tanks. T-34 tanks were invulnerable, so strong so powerful. Later in time, Germans improved their tank design to catch up but their production capability and replacement were not in line with growing war destruction. T-34 fabrication plants were too far away from eastern front, so that German war planes could not reach to bomb. T-34 tanks were manufactured in 5- different fabrication plants each too distant from each other, so that fabrication was continued uninterrupted. During WW2, 84,000 units were produced and design improvements continued for better armor, bigger and powerful guns, more fire power. There were no radio communication in the early versions, so that tank crew communicated with flags between each other, in later models, radio was installed for fast communication.

T-34 off-road speed could reach to 50-60 km per hour in open war theater, whereas German tanks could go maximum 30-40 km per hr. It was a great fighting advantage for T-34 in war clashes. Hitler once said, "If I had known about the T-34 tank's strength in year 1941, I would not have attacked.". That is called deterrence today, T-34 tanks became war hero of the Eastern Front in WW2, which played a major role in winning the victory.

"Michael Koshkin" was the young design engineer of the first prototype T-34 battle tank. In order to prove applicability of the new tank design to decision maker war generals, he drove the first prototype T-34 battle tank from the plant to Moscow army command center in harsh cold winter conditions passing 2000 km off-road fields. He caught pneumonia and soon after the his lone test drive, he died. After receiving the permission, all over the country 5- different plants started to fabricate non-stop during war time 24 hours 7days, with 50% women, 25% young boy labor force, since all men were drafted.

During Stalingrad war, plants had even no time to paint the tanks, so that some of the T-34 tanks were sent without external final paint to battle front, to fight the invading enemy forces, that was an incredible history.

***

In 1942, in North Africa on Libyan desert, tank battles were very important in WW'2 the history. American Sherman tanks have encountered first time with German Panzer tank divisions on hot Libyan desert. American Generals has selected Sherman tanks although Shermans were weak, smaller and with short-range gun capability, but fast.

General Patton has once said, "The important thing in tank battle is whether Shermans could move rapidly to the back of the German Panzer and hit them back," That was the practice of ancient times, he learnt from "Roma- Carthage" wars. The way to defeat the war elephants of Carthaginians, the foot soldiers would give away to heavy war elephants to the front, then they move to the back of the beast, and they have to spit the elephant with spears behind at the weakest point. These tactics have worked in ancient times. Sherman tanks have also tried to apply the same tactics, but they did not work. In order to hit a German tank, it would be causing the destruction of 4-5 Sherman tanks in fire.

Anyhow low altitude flying aircraft and anti-tank artillery have helped Shermans to overwhelm German Panters. German tanks were stopped by lack of fuel, since the German fuel ship had been sunk in the Mediterranean by the British war ships. Also trucks to transport drinking water were bombed by war aircraft. German tanks left with no fuel, unable to move and lost the desert war. German General Rommel saved himself, by flying back to Germany. But his soldiers were surrendered. Total 340 thousand German POW soldiers were sent by ships to America during WW'2. They picked cotton in Southern cotton fields throughout the entire war. Meanwhile Alabama blacks were enlisted in American army, and they were sent to Europe to save white people.

First encounter of new untested T-34 battle tanks with their German counterparts on the Eastern Front is the best war story. Young Russian tank designer Michael Koshkin drove the first T-34 prototype to prove tank durability all alone 2000 kms from fabrication plant to Moscow and died from pneumonia he got during test drive. It is the saddest human cost of this main battle tank design story. Our Northern neighbor then have produced a total of 84,000 units T-34 battle tanks in WW2 as a series of 5-separate factories. Designers continuously improved design during the war, armor thickened, raised the gun fire power. T-34 tanks of 50,000 have been destroyed in the war, but the rest have the key fighting power to win the war on the Eastern Front.

***

Sherman tanks were generally weaker than German Tiger and Leopard battle tanks. Their guns were smaller, gun range were shorter, they had thinner armor plates. But these battle tanks could be manufactured in large numbers during WW'2 to beat the capability weakness with high numbers. While Tiger or Leopard tank fires on one of them, other Sherman tanks would circle and hunt the German tank. The same tactic was applied to T-34 versus German tanks. Comrades in the 5-different fabrication plants have produced large number of T-34 battle tanks non-stop, and also improved tank design, tested gun power on captured German tanks on field.

New anti-tank weapons were designed to put fire on battle tanks and kill the tank personnel inside. Armor -piercing explosive projectile bullets with explosive nozzle cone toward the tank interior have worked better in time, keeping battle tanks idle, inactive in the war. They created high flame beam to explode the armor shields. At that point, by melting armor and there were a few thousand degrees Celsius flame exploded into the tank, the crew was burned to death. If ammo was also ignited in the tank, they all suddenly exploded completely. The anti-tank weapons are among those with armor-piercing bullets, as sharp as pencils with tungsten drill bits. Bullets hit the armor, armor is pierced by tungsten pen, enters tank interior, helps blasting ammunition. Today tank designers decorate the tank exterior with high explosive resistant panels. Armor-piercing bullets stand out, giving explosion outside with early response, armor-piercing bullets trigger with early discharge. Providing armor work outside to keep bullet away from entering interior, and therefore are cutting blast effect.

Today, battle tank impact in fighting is limited, due to increasing impact of anti-tank planes A-10, helicopters and land mines. You will recall the pictures of obsolete destructed scrap on the roadside old design armored vehicles and tanks in Iraq war. Saddam's tanks were demolished by helicopters easily. The effects of T-34 battle tanks were ended during Korean war by anti-tank weapons which were effectively and widely used by food soldiers. So new designs were introduced with better armors. War is cruel, inhuman, but one should be strong enough to be deterrent in our environment to survive.

***

From open sources we understand that the local MBT (main battle tank) design and tests are not yet completed for full scale production. Driving tests are satisfactory. Tanks nee electronic radar shelter against air attacks, electronic camera surveillance systems, land mines detection equipment are to be mounted on tank body and tested. Real war tests are not completed in war conditions. We would expect to test at least one prototype in a war zone, such as in Afghanistan. Coalition forces do not participate into war in Afghanistan just to bring peace to that land. We all know that armies go there to test their new fighting equipment, whether they are battle tanks, or heavy rifles, or helicopters.
British, German, American tanks are being tested there. Test sites of Russian tanks are currently in Chechnya, Ukraine and Syria. Let us know well about the power of Syrian tanks and talk about them. Syria has a total of 4850 units of T-55-62-72 Russian tanks which are obsolete in todays terms. But the latest model T-90 could be given to Syria when suppliers feel necessary, then our new generation battle tanks have to cope with the latest T-90, as well as Abrams of Iraq in future disagreements.

There are only 4- each MBT prototypes in development. 4-batch series fabrication each with 250 units will be initiated from 2016 on. Unit budget price per standard MBT is estimated to be USD 5-6 million. Battle capacity with total 1000-tanks in the region will be a serious show of deterrent force. We need to investigate the neighboring dangers in times of disagreements. Syria has T-55-62-72 obsolete Russian tanks but they could have T-90 tanks in future. Israel army has their own design war tested Merkava M4 battle tanks with front mounted powerful engine. Merkava tanks are the only battle tanks with front engine, all other tanks have rear engines. Iran has some American M60 Pattons, and their own design new battle tanks. American Abrams battle tanks are left in Iraq, however some of them in north military bases were captured by new islamic insurgents. Battle tanks should have electronic remote self destroying capability, which could be activated in case of captures. We understand that those Abrams tanks had that immobilizing capability to make themselves unusable.

New generation main battle tanks should have radar shields against hostile air and land attacks, and should have missile capability against helicopters. Tank also should fix its gun electronically to the enemy target and it should stay steady, shoot and hit while moving at high speed. In the latest models, tank crews are reduced to three personnel since most of ammo loading are organized earlier. Cyber security is also very important since battle tanks are now full of computers almost for each and every task to carry out.

***

Towards the end of the WW'2, "Giant Tiger" was designed and fabricated by the direct order of Führer. They were very large tanks. They were sent to France front. 70-ton giant battle tanks could not succeed in real war conditions.

Because the roads were narrow, they were unable to maneuver within the settlements , could not make turns or returns. They were too heavy. They could not pass the bridges, you had to make a special bridge. So there is a limit to the size of the tank. At the beginning of the WW'2, German battle tanks were a military success in the Russian steppes. German tanks could hit enemy within 1 km range with high accuracy. The initial hitting range of early T-34 tanks were 500 meters. Therefore they should get close to the German tanks. However, the number superiority, better survival capability difficult winter conditions, easy operation, higher field speed, easy refuel to the remote war theaters, better repair and maintenance capability, all had increased T-34 survival rate at war.

***
Our land forces used various updates of American M60 and German Leopard tanks in the past. There is no T-34 tank in our list. Starting from year 2016 on, we shall produce 4 batches each with 250 tank units. Although the prototype is designed and produced by one company, we understand that there are three different private companies in the competition to get the order. In fact it is better to distribute the fabrication order to multiple suppliers in Istanbul, Izmir, Ankara, even we should look for more fabrication centers in organized industrial zones of cities like Sivas, Eskişehir, Malatya, Antep.

We have gathered above article with available open intelligence sources through internet web pages, mainly from Wikipedia. If you have any comments, corrections, or advise, you can always write to me,
My E-mail; halukdireskeneli at gmail dot com

We wish all of you and your families a Merry Christmas/ Happy Holidays, and all the best for the New Year 2015.

Prinkipo, 25 December, 2014


Haluk Direskeneli is a graduate of METU’s Mechanical Engineering Department (1973). He has worked in public and private enterprises, US-Turkish JV companies (B&W, CSWI, AEP, Entergy), and in fabrication, basic/detail design, marketing, sales, and in project management of thermal power plants. He is currently working as a freelance consultant/energy analyst of thermal power plants, and utilizing his basic/detail design software expertise for private engineering companies, investors, universities, and research institutions. He is a member of METU Alumni and the Chamber of Turkish Mechanical Engineers Energy Working Group.


http://www.turkishweekly.net

TURKEY: Energy & Infrastructure Forecast 2015, Risks and Opportunities


Dear Energy Professional, Dear Colleagues,

Now is the time for our traditional annual forecast for our local energy markets in the New Year 2015. Please do note that economy and business are always shaped by expectations. Market expectations are important in the economic forecasts. At the beginning of each year, there are many economic forecasts made by the nationwide daily newspaper columnists, however as we all see there are almost none made in energy markets other than this one you are now reading. Within our professional capacity, we have tried to outline a draft forecast albeit maybe somewhat irrational/ unfair for the New Year. anyhow it is better to have one, rather than none. Here are our expectations for the New Year 2015;

Electricity
Local power generation capacity could have reached to +69K MWs in year 2014, and consumption peak is recorded as +39K in last August. Turkey is still at very low annual per capita electricity / production / consumption with approximately +3300 kWh, EU current average is +10K; North American average is +12K.
Electricity demand growth slowed down in 2014. Slowdown in local demand for electricity in the first quarter 2015 will continue. Other than early winter shortages, electricity prices will not increase in throughout 2015.
Privatization of nationwide electricity "Distribution" and "Generation" are almost completed in 2014. "WholeSale market" and "Unbundling" process are ongoing. National electricity "Retail" systems will develop in 2015.

Gas
Local Gas consumption is expected to be +50 billion Sm3 in year 2014. In 2015, Iran may not cut-off Natural Gas flow due to excessive needs of during harsh winter conditions in her own domestic market. In case of any winter interruption, Russians will increase supply capacity in the Blue Stream for a substantial premium as usual.
Gas flow from Iran to Turkey will be easier since US sanctions over Iranian exports are expected to be lifted soon after finalization of Nuclear talks in Geneva. That may cause more uninterrupted gas from Iran for long term, although gas price will not be reduced, but stay stable for medium term. Gas is still too expensive. Western Gas is now approx. 11.00 US Dollars per MMBTU as of Dec-2014 at our western border. Turkish natural gas demand will begin to fall due to counter measures taken, probably by the second half of the year. Accelerated increase in local fuel prices, is expected, after the general elections which will take place in June 2015.

Pipeline
Part of Western natural gas pipeline supply by Russia's Gazprom is placed to local companies. We expect market share wars between them.
TransAnatolian Pipeline Tanap project is in fast-track agenda. Nabucco is closed.
New "South Stream" underwater pipeline from Russia to Thrace border, is recently announced. It needs time for full realization.
Northern Iraq oil and gas pipelines are on hold due to civil war in Syria.

Shale gas
It is too early to expect any substantial "Shale Gas" production in our country. There are two specific regions for exploration, but gas production can not be realized overnight. On the other hand, "Shale gas" boom in the USA will reduce gas prices in the spot market for sure. Europeans are reluctant since cracking process may trigger earthquakes, and huge amount of injection water is polluted.

Gas fired Combined cycle power plants
We expect less number of investments for new natural gas fired  Combined Cycle power plants due to increasing Current Account Deficiency. There are still new investments in Kırıkkale, Thrace Çorlu, Adapazarı, Ankara Kazan, Kırşehir, Bandırma, Mersin, Kırklareli, Izmit on gas fired combined cycle power plants.
We do not know who will supply the necessary gas for these new gas fired plants, and at what price.

Iranian Nuclear talks
Iranian Nuclear strike capability makes Israel nervous. Although "G5+ Iran" has already agreed on nuclear settlement for non-aggressive nuclear use, Israel may still initiate surprise attack to Iran which may lead to global energy crises in the world. So we should be on the safe side and we should have increased underground gas storage capability and fuel storage facilities.

Nuclear
Russians started to outsource all non-critical equipment for Akkuyu Nuclear Power plant, starting from local civil works, high capacity steam turbines, instrumentation and controls, due to experience on serious shortage of available commercial financing. Environmental Impact Assessment (EIA) report approval is received in late 2014.
Since the ongoing nuclear project is not commercial, but purely political, political financing for that gigantic figure is not so easy. Political risks of a nuclear power plant project cannot be properly estimated; hence non-commercial project has no commercial meaning.
Hot seawater will be a chronic problem for plant cooling system in Akkuyu.
Sinop Nuclear power plant project is awarded to "Japan+ French" consortium. An Inter-Governmental Agreement (IGA) was signed between Government of Republic of Turkey, and Government of Japan on 3rd May 2013 for the construction of Sinop NPP.
We suspect if Japanese commercial companies can secure approx. 22 plus billion US Dollar project financing. We shall wait and see the outcome. They may face financing difficulties, although local public company EÜAŞ will get 35% equity partnership.
Sinop Nuclear Plant site is in the thick forest. Local "Forest Law" and compensation for demolished "trees" would be a great burden on the project budget in the long term.
Cold sea water is better for overall efficiency and for nuclear power plant cooling systems. Therefore the next nuclear power plant sites are expected to be on the BlackSea coast line, maybe in İğneada on the NorthWest and Hopa on NorthEast.
New nuclear power plants are expected to be close to metropolitan cities with heavy demand, so Kırıkkale-Ankara, Aliağa-İzmir, and even Kemerköy-Muğla are possible new sites in long term consideration. French, Korean, Chinese Nuclear companies may participate to these new nuclear power plant investment projects in future.

Privatization
3x210 MWe Yatağan- 2x210MWe Yeniköy- 3x201MWe Kemerköy thermal power plants in southwest of Turkey are privatized in 2014. After plant sales, renovation, rehab, re-power or complete demolition are expected by the investor.
Imported coal firing 2x600 MWe new thermal plant could be build at seaside Kemerköy plant site in the long term. Summer holiday facilities can also be considered at the plant site with complete reutilization.
Local hard coal firing 2x150 MWe Çatalağzı-B thermal power plant in Zonguldak county on the BlackSea coast is also sold. Orhaneli 210 MWe, Tunçbilek 430MWe thermal power plants are also privatized in late 2014.
Due to low investor appetite both local and international, privatization strategy will be reconsidered in order to increase the ongoing high income based tendering process.

Coal
We expect new investment initiatives on new found coal mine fields in Konya Karapınar, Afyon Dinar, Eskişehir-Alpu in order to build new thermal power plants under locally developed clean coal technologies.
Local coal firing new thermal power plant constructions in Bolu Göynük, Eskişehir Mihalıccık, Bursa Keles (EIA reactions), Manisa Soma, Adana Tufanbeyli (two separate plants 700 MWe and 450 MWe) are in construction progress.
Thermal power plant investments in NorthWest BlackSea coast are expected to be on hold for a while due to  ongoing EIA scheme, and due to high reaction of local environmentalists. 
Local Regulation of foreign personnel employment is changed, so cheap foreign employment from FarEast countries is not possible any more.
Situation in Soma for new 510 MWe thermal power plant seems to be on hold due to local reactions to olive tree deforestation. Investor company should look for nearby empty land to build new  thermal power plant.
Moreover there are a number of imported coal firing new thermal power plant applications for Bay of Iskenderun, Soma, around Sea of Marmara, Bay of Aliağa but public authorities are quite reluctant for approval due to high impact of imported coal on "Current Account Deficit (CAD)".

Afşin Elbistan

Due to ongoing high environmental pollution, no sufficient filters, no desulphurization, no rehab, it is our sincere recommendation that existing Unit Afşin Elbistan-A group, should be shut down, dismantled and sold as scrap. However A-group is now in longterm hand-over process in privatization. After take-over, new plant installation is strongly recommended.
Elbistan Çöllolar coal fields landslide disaster was forgotten after the event. Reutilization will be enforced after legal procedures are completed. De-watering- drying of the landslide region is continued. Hurman Creek riverbed is changed, it will flow from north without passing through the mine field.
Çöllolar coal mine field will be in preparation by the end of next year, and only after normalization of coal fields in Çöllolar, then AfşinElbistan-B plant can work at higher capacity factor.
Afşin Elbistan Coal is supplied to the plants at about 1.75-1.80 US Dollars per MMBTU, which is quite competitive. But calorific value is too low. So we need to have proven coal firing technology for the local coal.
Afşin Elbistan-B plant has proven technology for firing local nearby coal. However two units are now out of operation. Second unit had fire accident in boiler dust filters. Third unit had steam turbine break down. Repair works are recently tendered. It will need at least minimum two years for complete operation.
New international partners are sought for Afsin Elbistan C-E. We presume that the tender activity is a long-term wishful thinking.

Wind
Investment appetite in Wind capacity is almost saturated, Environmental concerns will be on the agenda. High voltage transmission lines are missing. Huge investment is needed for those new transmission lines for more aggressive wind power integration. However investments will continue at a moderate level at about 300-500 MW per year.

Solar
Investment in Solar energy is relatively little. Without making local fabrication of the solar equipment; one cannot go further with expensive electricity generation. Only household small scale electricity generation could be implemented.
Electric cars / buses are in agenda, but we shall all ask who will be paying high cost of new transformers due to additional heavy pulse load.

HEPP
HEPP investment projects receive severe reactions of local people, and reactions will continue on all legal platforms.

Climate change
Nationwide CO2 emissions will increase ever more with the ongoing coal firing investments. It is a great national dilemma difficult to solve in our energy hungry local market. How do we run away the climate change obligations? We shall have low profile participations of the public sector.

Local fabrication
Although there are a number of preliminary meetings in the Ministry, in the local fabrication associations, in various NGO groups, still local design, local fabrication, local engineering for thermal power plants do not exist yet. New public tendering procedures give price advantage to proposals with local fabrication.

Electricity Transmission lines
Construction of Thracian HV AC Submarine transmission crossing Dardanelles Channel will be completed soon. New crossings are planned. 
Construction activities for Submarine HVDC cable, gas and water supply pipelines from Turkey to Northern Cyprus will continue.

International relations
Turkey is to return to her historical motto "peace at home, peace in the world", principle rather than "precious loneliness". "Precious loneliness" is too costly foreign policy. No hostility is foreseen between democratic countries Greece, Israel and Turkey, however pushing for fair share of nearby natural resources is the rule of the game in international politics. Democracies do not make war between each other. Public forces/ votes force them to compromise.

Offshore East Med
East Med Cyprus offshore drilling work did not reveal expected results. Offshore Contractor Company is not comfortable with the early results. South Cyprus media and their government with wishful thinking still push positive expectations, trying to keep the case in international investment agenda with high hopes, but the situation seems not so promising, the investor does not want to gamble any more, return is not earlier than 10 years in time.
Israel Offshore fields are proven but they have production storage and transmission problems. These problems can not be solved before we have stable peace on East Med waters.
Black Sea Offshore drilling is a never-ending story at our end, everyone is talking about very large reserves, but there is nothing in reality.

Syria
Change of power in Syria is not foreseen in the short term. However influx of refugee number will get increased to 2 million soon. It is too alarming situation. We shall need approximately 10 billion US Dollars in 2015 for the Syrian refugees. This is a great burden on our economy. Our streets are full of desperate Syrian refugees. Street crime is on rise. Drastic changes in the current international relations policies are deemed necessary.

TTIP
We should participate to Transatlantic Trade and Investment Partnership, TTIP. That is vital task in 2015 for all public & private authorities. It is too costly to stay outside.

Restructuring
Not only the Ministry of Environment but also the Government is expected in reshuffle. Change in top posts will not be a surprise prior to general elections in June 2015.
The secondary legislation of the Energy Ministry is still in preparation. Some of new regulations in preliminary nature are released for public review. The Minister may leave his post in the next municipality and general elections due to party restrictions.
We expect reorganization as well as restructuring in Ministry of Energy and Natural Resources in order to reduce staff, to reassess duties and responsibilities...
EMRA needs to be reorganized and restructured, and Agency may be divided into two, maybe three. EMRA licensing will go on with reduced speed, copy / paste applications for license overrun archives. Rejection is still less than 2%. Most projects are on hold.
Each and every incentive/ every good intention are abused with extreme care”, so political power is reluctant to issue new energy incentives, especially on imported fossil fuel firing new power plants.  Current account deficit (CAD) is in sever situation due to increased spending on imported coal and imported natural gas purchases, at intolerable levels. Increased use of domestic coal / energy sources  should be encouraged.

Transportation
We are happy to see that "High Speed Train" investments are on track. Ankara- Istanbul railway is completed in 2014. Ankara- Izmir, Sivas, Erzurum are in progress. We hope to have more intercity metro line constructions.

General Elections
Turkey will enter into a period of nationwide frenzy general elections in year 2015. In new general elections, all of 3-term MPs will leave Parliament and Ministerial posts. Ministries of Energy, Economy, as well as Treasury will miss their strong leadership.  That is a great risk in macro economy administration.

Investment Environment
Almost all existing thermal power plants are in privatization, but investment appetite is low because of the ongoing global economic crisis and impact of June 2013 Gezi Park public uprising. The same tendency may continue in the second half of next year.

Western Foreign investors have lost their appetite in our energy markets; and domestic investors do not have money. International investors are looking for simple legal terms in the environment, such as "rule of law", and "transparency". On the other hand investors of oil rich Middle East countries may still have increased appetite.

Local real estate bubble may face difficulties and few bankruptcy may appear.
We face project finance difficulties on controversial mega projects. We have growing "current account deficit". Drastic measures" on public spending will continue in 2015. 

In recent popular social media, in tweeter, facebook, whats-up, investors are more or less incorrectly/ but implicitly represented as negative profiles, it is alarmingly too deceptive. That public profile should be corrected.

Consolidation in electricity generation business will increase with M&A's. Few bankruptcies may take place. In principle, we would recommend individuals to reduce expenditures, reduce spending, reduce borrowing, and stay cash, stay liquid.  Everyone in business environment says that 2015 will be another difficult year. We were able to predict this much.

We shall be too pleased to receive your comments/ contributions in the New Year. Happy and Prosperous New Year to you all!

Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of METU Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.

Ankara, December 2014,


http://www.turkishweekly.net

Sunday, December 07, 2014

How should Investment Incentives be given? Should they be given?


Dear Readers,

This is a local saying in our geography, "All investment incentives are abused with intensive care". Let me try to explain this expression. We encourage exports, exporters create fake documents to get incentives to get tax back. We make procedures easier in order to encourage thermal power plant incentives, then vulgar investors initiate confiscation of forest land, the agricultural population of the region uprises. We make EIA applications easier for more combined cycle power plant investments, vulgar investors use drinking water of the local people in their cooling water system and water becomes heavily polluted, not suitable for any further agricultural use.

New EIA regulations are published in the Official Gazette on 25th November 2014 with No. 29186 and entered into force. Thermal power plants up to 300 MWt (about 100 MWe) are now exempted from the application of EIA. That 300 MWt capacity is quite high. Agricultural lands, forestry, wetlands, olive groves, are protected areas named as "Sensitive Areas". Ministry will give the final decision of the EIA Regulation. So the final decision will be in the hands of political will.

Thermal power plants must comply with environmental standards. Exemption from environmental norms should never be in question. Investment incentives are penned by well-intentioned western minds. In practice, oriental cunning heads- evil minds are engaged for loop-hopes, then in the end proper implementation of the work becomes deteriorated. Investment incentives can not be received by those who really deserve, but those who are close to the political will, get the most benefit.

EIA exemption is in unfortunate practice now. It means investor will have the exemption from the obligation to comply with local and international environmental norms. EIA exemption is definitely need to be removed. We all know that investment is not an easy process. Investors must prepare EIA and they should convince the local people. If there is no local acceptance, then this investment is not appropriate for the local people, so that this investment should cease. It is not correct to cut 6000 olive trees overnight, in order to clear the land to make ready for the thermal power plant construction. This is unacceptable. The investor who cut the grownup 6000 olive trees in one night, harmed us all.

The olive tree is mentioned in the all three holy books. Anyone who advocates importance of constructing thermal power plants, advises the importance of making the local indigenous basic design, anyone who puts money into investment, anyone who has built the power plant, were all in difficult situation in the public vote. There is no party to defend this horrible event against environment.

This irresponsible act harmed our hard earned reputation as well as our business profile. There is no justification of this act. There is no reasonable economic comparison between 500-year old olive trees, and the power plant with barely 20-30 years of lifespan. This comparison could not be made with simple arithmetic.

If a wrong practice is occured, it should then be immediately notified, corrective measures should be taken immediately. If the wind farms on open farmlands makes life unbearable with noise it created, and if locals in residential areas are complaining of noise levels, investors are to be warned to get quieter wind turbines. They should be warned that their wind turbines should not demolish the forest where they will be placed.

If there is an agricultural land seizure risk with solar investments, and if local farm people will remain without land, this should be avoided.
If the guaranteed purchase price cents per kW-hr is less that expected, they should be warned, so that the over-stimulated demand should be redirected. Market conditions should govern free competition. The consumer should be prevented from taking expensive electricity.

If you want to make an investment of thermal power plant with 1000 MW output capacity while firing imported coal, you will need at least 2,000-3,000 acres of vacant land. If yo make a false application of 300-400 acres of land for EIA application, you should be warned. "This is wrong, you need at least 2000 acres, 400 acres land is not enough for you. You can not ask public expropriation for additional land nearby. You can not get forest land, or agricultural land. You can not ask clearing land with olive trees.

Combined cycle power plant investment can not use underground water for their cooling water system, if that water is already allocated for the agricultural farmlands nearby. Otherwise investment risk premium increases due to local environmental concerns, IPO buyers impasse will end up loss of billions of dollars, while you try to save a small magnitude of that value by jeopardizing environmental norms and regulations.

If the ash dam or proper ash storage facility for a coal firing power plant is not properly constructed, if you pollute the nearby sea by deep water discharge, you should be warned, and the work should be corrected.

"I have money, why don't I construct the power plant where I want?", say some newcomer investors who are unaware of the sensitive environmental issues. Energy is not a priority, but environmental concern is. Having money is not enough to invest where you want. There are rules, regulations, laws, local and international environmental standards, to which we all must comply with.

New environmental equipment investments in public thermal power plants were exempted by law to be enforced until 2018. Privatized power plants get the same exemption.

Compliance with environmental norms must be put off. We give investors extended exemption from environmental investment. That is not fair, not correct.

Investors ask more exemptions at least for 3-5 more years time extension for rehabilitation expenses. They further initiate reduction of personnel expenses. Our people becomes unemployed. We face with unnecessary social mess, public tension and confusion.

With this pace enforced, we shall face more and more deforestation, reducing farmlands, demolishing of lands of olive trees. We now promote renewable energy, more wind turbines, more solar panels to be installed on empty lands. We also guarantee higher electricity purchasing rates in order to let them receive better financing terms. These incentives will serve primarily the importing equipment. Our environment will be saturated with cheap imports, poor quality, non-redundant renewable energy equipment with non-maintenance contracts.

There are incentives to promote domestic manufacturing to be implemented. We fear that those measures will be plagued by bureaucratic procedures, which will make regulations not applicable, or facilitation will be worse. Who can build a reputable turbine / generator plant in five years, construct the factory, get market share, get trust of new business credit, get orders to survive, finalize manufacturing, make erection on-site, operate and further promote domestic production? This is a dream which can not be fulfilled. We may establish assembly plants of foreign firms, and initiate partial production.

Locally designed power plant construction with local coal firing is not so easy in a few years. The measures which are taken are not so clear for encouragement of domestic manufacturing. There is a draft roadmap summary already released for public, but details are not disclosed yet.

On the other hand, our local civil contractor companies are doing heavy labor abroad in power plant constructions for neighboring rich investor countries with limited labor force. They have record level of orders. However they earn money by marketing the most basic human workmanship. They do not supply basic design. Their engineering is limited. Major foreign contractor company makes the basic design, delivers the necessary engineering, and gets the biggest share of the profit.

If an investment does not create local employment, it has no importance. Investment incentives should promote local engineering, local fabrication, local employment for site installation, and further operation and maintenance works.

Public authorities fear that if there is no proper investment incentive, then there will be no investment. This assumption is not correct. If there is proper market forces emancipated under rule of law, under free market conditions, under fair competition, there is always investment for the prosperity of all. On the other hand, if there is investment incentive then there is corruption possibility in favor of for those privileged..

Transparency International's latest 2014 annual "‪Corruption Perceptions Index" saw ‪Turkey drop 14 places to 64th of 175 countries. If our corruption perception index is so bad, it is better to avoid any further possibility to get worse with introducing un-manageable investment incentives. Investment incentives are unnecessary cost, unnecessary burden on our economy.

It is much better not to have incentives, and let the market forces to dominate the local environment under close scrutinizing by public authorities as well as under surveillance of NGO institutions.

In our geography, we visualize that the more investment incentive measures we enforce, the more corruption we create. Therefore it is better to stop investment incentives completely. We would strongly recommend and prefer that no incentive should be provided other than current standard general tax cuts and flat electricity feed-in tariffs for energy investments.

Prinkipo, 09 December, 2014

Haluk Direskeneli is a graduate of METU’s Mechanical Engineering Department (1973). He has worked in public and private enterprises, US-Turkish JV companies (B&W, CSWI, AEP, Entergy), and in fabrication, basic/detail design, marketing, sales, and in project management of thermal power plants. He is currently working as a freelance consultant/energy analyst of thermal power plants, and utilizing his basic/detail design software expertise for private engineering companies, investors, universities, and research institutions. He is a member of METU Alumni and the Chamber of Turkish Mechanical Engineers Energy Working Group.


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