Coal dispute sheds light on shock raid in Kangal Sivas Thermal Power Plant coal mines

ISTANBUL - Nine people were arrested on charges of fraud after the June 4 gendarmerie raid on the Kangal Coal Basin in central Anatolia. Now, it has been revealed that the raid coincides with a legal dispute between a private company and state-owned Electricity Generation Co.

The June 4 gendarmerie raid on Demir Export, a Koç Group company, coincided with a dispute between the firm and state-owned Electricity Generation Co., or EÜAŞ, it has been revealed.

The raid came as the company was preparing to take EÜAŞ to court, and the gendarmerie operation against the firm’s facilities in the Kangal district of Sivas, in central Anatolia, came as a shock to the company. After the raid, nine Demir Export executives were arrested.

The dispute between the parties is related to a 20-year operating rights contract awarded to Demir Export last year.

The right to operate the Kangal Coal Basin was given to Demir Export in 1989, for a period of two decades. As the deal expires this October, Demir requested last year to extend the agreement for another 20 years, exercising its right to request such an extension, which was stipulated in the original agreement.

As EÜAŞ approved the request, a new agreement was signed last year. But this year, EÜAŞ demanded to scrap the new accord, claiming that the High Planning Board, or YPK, objected to it. Demir Export replied that the deal was valid, adding that the company may take EÜAŞ to court if it decides to annul the agreement one-sidedly.

"We are trying to convince Demir Export not to go to court," said Mehmet Biçer, deputy managing director of EÜAŞ. "We will continue negotiations."

Grand Energy operation

In an interesting coincidence, the Gendarmerie Command of Sivas Province raided Kangal Thermal Power Plant, operated by EÜAŞ, and Demir Export facilities, which operated the coal basin and sold the coal to the plant. The shock raid rested upon the allegation that Demir Export was unlawfully selling low-calorie coal to the plant, which resulted in millions of dollars of losses for the state company. The raid, named "Grand Energy Operation" by law enforcement officials, ended as 22 people were taken into custody, including the operations director at Kangal Thermal Power Plant.

After questioning, nine of the accused were sent to jail, including Nizamettin İnsal, Demir Export’s Kangal Coal Facility deputy director, and Ahmet Suat Üstün, director of the EÜAŞ Kangal Thermal Power Plant.

Seven of the arrested are Demir Export employees, while two work at EÜAŞ.

"The YPK objection [in signing another 20-year deal] was about updating some articles of the 1989 agreement," Biçer said. "We evaluated the situation and accepted the YPK position. Then, Demir Export said it would file a lawsuit against EÜAŞ. We have been trying to convince them not to. On Monday, we met with [Demir Export executives]. We told them that even if the deal is canceled and the tender is renewed, EÜAŞ needed at least two years to prepare [for the bidding process], a period in which we will strive to make sure Demir Export uses the license. The issue is complicated and will take time to resolve. Even coal mining in the facility might stop. In case of a new tender, costs might also rise, as this will be an investment from scratch."

11 June 2009 Hurriyet Daily

The Difference of the Newcomer

Dear Energy Professional, Dear Colleagues,

Your writer knows that it is too early to make a sound assessment of performance or any critique of the new MENR Minister.

However we have some small positive indications. These indications can be appreciated if you could inspect the Ministry web site www.enerji.gov.tr

- Earlier, MENR web site was like a personal blog page with Minister's CV, his press releases, speeches, etc
- Now that portion is kept more reasonable.
- You can read CVs of former Ministers.
- You can read more news on national scale, more documents, final or in draft format on Energy environment,
- You can reach to new draft Strategy Document in the MENR web site, although it is only in Turkish language yet
- MENR web page English section is under construction
- Every Minister works with his/her own team, which means, own reliable experts/ consultants/ secretarial posts, driver, and guards. All these jobs are changed.
- Now the top ministerial posts, general managers, Undersecretary Posts are in consideration. It is expected to be on merit basis not only religious/ party loyalty.
- New Minister is graduate of Istanbul Technical University Faculty of Electric Electronical Engineering in year 1985. So he knows electric and energy business.
- There is an ongoing ministerial work that EMRA will be restructured and hence hydrocarbon section could be separated in a different identity.
- Afsin-Elbistan-A thermal power plant new rehabilitation tender is on track
- Afsin Elbistan C-D thermal power plants will be tendered as long term leasing of coal fields and power plant scheme
- "Amil-i Mutehassis/ Expert OEM Owner/Designer" contracts with no competitive tendering will be terminated due to high rumors of corruption. They will not be repeated any more from now on.
- Upon news for corruption charges in Sivas Kangal coal mines due to lump sum coal sales without competitive tendering, he says that public purchase without competitive tendering is not possible. Good point to continue.
- Soma-B, TuncBilek, SeyitOmer, Catalagzi-B rehabilitations will be reopened this time to competitive tendering in international scale.
- Nuclear tender will be completed, in one way or another. It is too delicate/ too sensitive issue. We do not know how it will be finalized.
- His new Undersecretary is expected to be the existing Chairman of the Privatization. That means there will be acceleration in privatization of generation plants in future.
- Minister is expected to deliver a speech in Washington DC annual ATC conference. However it is reported that there is not much high post American audience.
- Minister had many foreign travels in a very short period of time as if he wishes to prove that it is possible to manage the Ministry without being physically in Ankara. He may be right.

We expect new and better initiatives from our new Minister,

In getting compliance with Kyoto protocol in this hard world of global warming,
More utilization of local coal/ wind/ hydro resources,
More thermal power plants designed / constructed and operated by local companies,
Utilized with clean coal technologies
i.e. Circulating Fluid Bed (CFB), Integrated Gasification Combined Cycle (IGCC),
firing more of local low quality lignite,
More emphasis on national energy supply security,
More professional education and creation of engineering backbone in nuclear technology,
More green employment in green technology.

We wish all the best and success to our new Minister in his hard mission to construct more power plants, to attract more new investments in energy business, and to generate more energy in our country in future.

Your comments are always welcome.
Haluk Direskeneli, Ankara based Energy Analyst