Sunday, March 28, 2010

RWE AG Germany to build 770 MWe Turkish power plant in Denizli

Dear Energy Professional, Dear Colleagues,

German power company RWE AG announced that they have signed an agreement to build a new 775 -megawatt thermal power plant in Denizli, western Turkey, with their local joint venture Turcas. Financial details were not released yet by the investors but RWE, based in Essen, said they would probably make its final investment decision in the first quarter 2010.

We have further reviewed and evaluated the EIA reports in their web site

We noticed that Chamber of Mechanical Engineers is missing from the list of local stakeholder NGOs. We are not so happy about that.

Metka, a Greek power plant builder/ constructor with in-house basic engineering capability, will be responsible for construction, and Germany's Siemens AG will supply major components, including gas and steam turbines, RWE said in a statement. The plant, to be finished in 2012, will be a 775-megawatt combined cycle gas turbine plant.

"The Turkish market is attractive, and we wish to carry out a few more projects in order to participate in the growth opportunities the country offers," Leonhard Birnbaum, RWE's chief strategic officer said.

Germany's energy titan RWE and Turcas Guney Elektrik Uretim A. S have awarded METKA the contract for the construction of a 775 -megawatt power plant near Denizli, Turkey, an official announcement said by METKA's Press Release.

The budget for this project is at approximately 600 million Euro, of which 450 million Euro plus a 40 million Euro option for EPC contractor while the backlog of projects contracted to the METKA Group now stands close to a total of 2.3 billion Euro. This is a major achievement for the Greek company which will for the first time cooperate with RWE, one of the leading energy companies. Details are as follows

Project Owner: RWE & Turcas Guney Elektrik Uretim A. S. - the newly established joint venture formed by the leading European utility company, RWE AG and Turcas Elektrik Uretim A.S., a subsidiary of Turcas Petrol A.E. (Turcas), a major energy player in South East Europe.

EPC Contractor: METKA S.A. Greece- with in-house basic engineering capability. METKA has a long background in the Energy sector, with particular strength and experience in the construction of power generation facilities. Building on its long standing industrial manufacturing and site construction activities in the power generation field, METKA has successfully developed its capabilities to become the leading EPC contractor in Greece, with a growing profile in the region and beyond.

METKA has completed significant thermal power generation projects on EPC basis including the "Endesa Hellas" Co-Generation Plant and the Lavrio Unit-V natural gas fired Combined Cycle Plant, as well as several open cycle gas turbine power plants for the islands of Crete and Rodos. Recent international projects include the Petrom 860 –megawatt combined cycle project in Romania and the Korangi 220 -megawatt combined cycle power plant in Karachi, Pakistan.

The Company has experience related to lignite fired power plants, having played a very significant role in the construction of most of the lignite fired units in Greece. The most recent example of this activity is for the new 330 -megawatt unit at Florina in Northern Greece.

For lignite fired units it is also important to mention the recent EPC contracts for environmental upgrades of existing units, such as the installation of new fly-ash electrostatic precipitators and the upgrade of existing precipitators at Kardia and Agios Dimitrios, plus the replacement of the electrostatic lignite precipitators at the Megalopolis power plant. In each of these cases METKA was the majority partner in the consortium established to carry out the EPC contract.

Denizli Key Project Characteristics: Turn-key engineering, procurement and construction for state-of-the-art natural gas fired combined cycle power plant with a net power output of 775 megawatt. The plant will be based on Siemens SGT5-4000F gas turbine technology, using a multi shaft concept: 2 on 1 configuration of two gas turbines, two heat recovery boilers and one steam turbine.

Schedule: The project will be executed in phases, with a first phase for engineering and activities related to permitting the plant, followed by the full project construction phase. Commercial operation of the plant is planned for the end of 2012.

Budget: METKA's scope represents an amount of approximately Euro 450 million with various options which may be exercised up to the end of the first phase with a total amount of approximately Euro 40 million.

METKA says that they are proud of this new award by a client with such strong credentials, representing a significant further recognition of its capability as a major EPC contractor at the international level.

Your writer feels happy to get such news on new energy investments in our local energy market, provided that they are environmentally friendly, they have completed all obligations for Environmental Impact Assessment Reports, they receive their updated license from the Local Regulatory Board, design by local engineering companies as much as possible, fabricate in the local fabrication plants as much as possible, install by our local contractors, commissioned and supervised by our local engineering power, operated by our own staff, and regularly checked by our own Labor force in programmed maintenance.

Your writer sincerely feels that energy investors deserve all our support to complete those power plant investments. They deserve since they risk their own property in order to get proper "Corporate Financing" at reasonable interest rates, and payment terms.

Hence your writer also tries to avoid them to make any technical mistakes in their power plant design, furthermore to avoid incorrect selection of the necessary equipment, wishes them to operate the plant for many years, to generate electricity which will push our economic prosperity.

There are not much project details; only already known details are disclosed. We learn that the output capacity is 775 -megawatt. Siemens will supply the major equipment, Siemens SGT5-4000F CGG configuration will be in the scope. Suppliers are expected to install air cooled cooling system. That means they will not use much underground water. That is good for nearby ongoing agricultural activities. As a matter of fact, water is scarce at the neighboring site.

Foreign investor should be comfortable here that we are ready to help them. We should warn that they should not get involved in any fraud for speeding the public procedures, getting EIA and EPDK license updates.

Local investor should feel comfortable that we shall be warning them in proper design, sourcing fabrication, site installation, logistics, and public approvals.

We all expect that these energy investments should bring prosperity, employment and peace to the site. Maximized local manpower, maximized local engineering/ fabrication/ site installation capabilities should be employed.

After brief review of the project, we feel that the investor group should need answers to the following questions as a stress test of the investment project;

We need to learn the origins of the basic equipment, gas turbine, steam turbine, heat recovery steam generator, condenser, cooling tower. Since the foreign investor is from Germany, we understand that the gas turbine will be of Siemens 2 each SGT5-4000F.

Similarly steam Turbine will also be purchased from Siemens. What are the budget figures? When are they going to be delivered to site? How are they transported from which sea port?

Since there will be space limitations at project site, the heat recovery steam generator will be of vertical gas pass, forced circulation type with supplementary firing. Who will be designing the forced circulation type HRSG (CMI- Belgium?), who will be the fabricator?, who will be the local construction company for site installation?

In EIA certification and Local regulatory board for license updating, there should not be any deviation of the information they will be declaring in the local information meeting and the information they will be furnishing to the public administrations.

Since the selected site is 545 meters above sea level, they need to have supplementary firing in their heat recovery steam generators in order to reach 775 -megawatt electricity generation output. We would be too pleased to learn the details of their burners, burner management systems, emission controls.

We shall be too pleased to learn where they will be purchasing the cooling towers, air cooling system design and equipment. As we all know similar size thermal power in Baymina Temelli project, they could not install air cooling systems since the towers would be in the airplane landing route to Murted air force airport.

Investors are to check if the plant air cooled cooling towers are free from airplane landing routes of Denizli Cardak International Airport which is only 20kms far, as well as emergency landing site at nearby highway. Red lights on the high cooling towers may not be sufficient for the air traffic. Foreseeable Risks are to be clearly defined at this point.

We need to know who will be the site constructor, what is the budget figure? They should be local companies. Local labors will be needed at the site for smooth and fast execution of the construction.

We need to know the estimated project period, the importance milestones; we expect that 28-30 months could be a reasonable period.

We need to know who will be making and paying the new 380 kV transmission and new natural gas incoming pipeline to the site.

We need to know when the major equipment land transportation will be made; do we have sufficient roads for that transportation, which will be making the road reinforcement to enable the transportation?

Do they have long term natural gas purchase agreement with respective organizations; do they have long term electricity sale agreements?

Do they/ investors consider any capacity extension in the long term in 10-20 years time? Do they have enough space/ land for that extension??

It is known that Siemens SGT5-4000F gas turbine is also suitable for IGCC. Do investors consider any IGCC application in future by gasification nearby Aydin, Yatagan indigenous lignite mines to avoid any energy supply risk?

Generally we observe that after plant construction and generation of income in 3-5 years, the foreign party decides to sell her shares to the local partner and leave the project/ country. That was the case in Enron in Trakya, selling all her shares to her local partner, Steag in Sugozu. How is the long term policy of the foreign party in this case?

We will be too pleased to learn if the local party will be thinking to create local engineering department to carry out necessary basic engineering in the long term.

We only get pleased to read investment, and sincerely feel that energy investors deserve all our support to complete those power plant investments. On the other hand, there is great risk in project finance of such investments due to public response.

Partners should make the risk assessment for long term gas supply and electricity sales.

Those companies, who are ignorant of local workforce employment expectations, and neglecting local engineering contribution, neglecting world class environmental limitations, will surely deserve the highest level of local resistance in legal platforms. They may have too much of a headache during project execution; therefore, the project finance institutions should make their risk assessments carefully.

We would like to warn them not to make any technical mistakes in their power plant design, avoid incorrect selection of the necessary basic equipment, as well as environmental requirements, and wish them to operate the plant for many years, to generate electricity which will push our economic prosperity.

The investors should feel comfortable that we shall be warning them for proper design, sourcing fabrication, site installation, logistics, and public approvals. We all expect that these energy investments will bring prosperity, employment and peace to the site. Maximized local manpower, as well as maximized local engineering/ fabrication/ site installation capabilities should be employed.

May God bless them with wisdom for all those who need. May God save you and forgive you for making any mistakes in your risk assessment. God bless you all.

Haluk Direskeneli, Ankara based Energy Analyst


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