Thursday, September 11, 2008

Tender for Afsin Elbistan C&D Thermal Power Plants cancelled

Dear Energy Professional, Dear Colleagues,

This is the second time that we witness the cancellation of the tender for Afsin Elbistan C-D thermal power plants. You will recall that we have received no proposal in the first tender which had 30+ participants.

It is your writer’s sincere feeling that cancellation decision is incorrect. Public administrators are miscalculating

General Manager of the Company confirmed that the Afsin-Elbistan power plant tender was cancelled because none of the bids were satisfactory for themselves.

GM said Company was not satisfied with the offers which they received and will hold another tender as soon as possible. Their administrative board had agreed to re-evaluate the tender specifications and will possibly make alterations. GM noted that “There are some technical and administrative problems in the bid specifications. We are trying to make improvements to the specifications and then we will reopen the bid within a month,”

The new tender is expected to be released by February 2009 at the latest. GM said the Company would undertake the establishment of the power plants itself if the second tender does not produce a satisfactory bid.

Recently investors from Japan, India, England, Russia, the US, Italy, the Netherlands and Belgium, along with local private enterprises Sabancı, Çalık, Ciner and Limak, obtained the bid specifications for the project which includes construction of the thermal power plants, selling the electricity from these thermal power plants and mine mouth coal in the Afsin-Elbistan region.

After failing to attract the funds necessary to finance the Afşin-Elbistan project, in June 2008, six of the interested companies that had planned to bid requested a four-month postponement in the tender; however, the Ministry refused to postpone the tender, noting that the request was received too late and that the tender needed to go forward as scheduled on June 26, 2008. Thus, Park Teknik of Ciner Holding and Akfen Energy were the only companies that ended up participating in the tender.

The Local Electricity Trading and Contracting Company will be providing guarantee to purchase electricity from the company that wins the bid for a period of 15 years. However, the companies’ offers on price per kWh were found higher than expected. As a result neither of the bids was accepted and the initial tender was canceled.

Building the Afsin Elbistan C and D units estimated to require almost US $5 billion of investment budget.

The Company decided to cancel the tender after it considered the price the bidders wanted for electricity produced from the plant was too high. Park Teknik and Akfen Insaat-Akfen Enerji said they would sell power from the plant at between US$0.15 and US$0.18 per kilowatt hour for a period of 15 years,

No foreign investors bid in the tender, held during increasingly turbulent global conditions.

Each of the new units will have capacity of 1,200 megawatts (MW), ramping up production capability at the power station in central Turkey, which currently has a total capacity of 2,800 MW.

The Company should eliminate the caste system in current tendering. At present, wealthy government-friendly individuals and companies occupy a higher caste, foreign businesses and smaller companies are deliberately treated as lower castes. If this is to become an international tender, then they must implement equal rights for all types of corporation and investors.

The prices declared in the proposal documents are the prices effective only after the plants were constructed and started to generate electricity and feed to the national grid. That is 4 years ahead of present time.

It is for sure that energy prices will get higher and higher in 4 years time, unless you turn more to your local indigenous energy resources, lignite, wind and hydro.

The simple calculations as made by inexperienced / unqualified/ consultants/ experts/ journalists in the daily newspapers are incorrect, also misleading,

More important than that the existing inexperienced public employees believe in those incorrect calculations, instead of making the calculations by themselves,
One should know that the prevailing proposal prices are the market prices. These prices are saturated/ calculated and finalized with careful risk analysis in fierce, open and fair competition between 30+ participants

It is for sure that there will be no better / no cheaper prices than the prices received at this last round,

It is our sincere feeling that the bidders were also quite reluctant to carry out the contract since the prices were too low, not too high, and again it is our sincere feeling that they might look for the administration to cancel the tender, and happy to receive cancellation.

There is no more interested party to participate to the new third tender unless commercial conditions are changed/ updated, scopes reduced

One should also keep in mind that with the prevailing local electricity prices, each plant could generate more that 1 billion US Dollar net worth of electricity at full load when they were in full operation. Therefore we can have more than 2 billion US Dollar net worth of energy generation per year from these C & D units together. With simple arithmetic the payback period is less than 2.5 years and ball park IRR is expected to be more than 40%. However, we have already lost 3 years in tender procedures.

This is wasted time and money of the public resources. There is no easy solution, inexperienced public employees will get some training but their training cost is too high and we all pay them to let them get that training. Your comments are always welcome.

Haluk Direskeneli is an Ankara-based Energy Analyst

1 Comments:

OpenID amerikaningilizcesi said...

What is the current development of solar and wind energies in Turkey? From my understanding, Turkey has potential in both of theses natural sources. I agree that the energy prices will increase over time and the commercial conditions are not suitable for investment, however I think that there is much opportunity for an investor to capture the wind and solar markets in Turkey. Turkey could be a good example of a clean energy investor and set standards for this region if there is serious discussion and supporting decisions about investing in appropriate energies locally and regionally. My opinion is that the movement has to begin at a local level, meaning areas with the ability to supply sustainable wind energy/solar..etc should be given the opportunity to invest in these energies, whether it be from foreign energy firms, or national firms. I know there is no simple solution to the energy situation, anywhere in the world, but Turkey is in a unique position in that the acquisition of petroleum based energies are so burdensome, that the most intelligent option is to seek clean energies.

4:28 AM  

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