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