Monday, May 31, 2010

New Risk Assessment on Iskenderun bay

Dear Colleagues

We are facing the most unpleasant military offensive in the history of our Republic. All our basic defense assumptions, all our alliances, partnerships, all our defense strategies have completely changed. In our geography, as was always acknowledged in the past, we have to survive by depending on our own strength. There is no alliance, no partnership, and the bare reality is that we are all alone.

It is not the time to respond, nor strike back overnight, no rush for any counteroffensive, but we should strengthen our borders, defend our strategic points, and wait for the appropriate timing for any response if necessary.

This is a humiliation by a rogue state. Hostility cannot remain unanswered. Reciprocity is the rule of the international relations. One should stay cool to wait until an appropriate time appears for a proper response.

There is another nasty development regarding our new imported coal firing thermal power plants on the Iskenderun Bay seacoast.

This region was the ideal location for imported coal firing thermal power plant investments, with no forest, no agricultural land, all remote almost uninhabited territory that is still close to imported coal transportation and exposed to relatively low environmental reactions.

The following ongoing projects are new energy investments in the Iskenderun Bay region:

SuGözü isken Evonik Germany with local partner Oyak for a new additional third unit of 600 MWe imported coal firing thermal power plant;

Suez new imported coal firing thermal power plant to generate 1200 MWe in Yumurtalik, EIA is recently received

Diler Electric 600 MWe imported coal firing thermal power plant next to their iron and steel mills in Iskenderun bay;

Sarp Electric of Bilgin Energy group 1215 MWe imported coal firing thermal power plant in Yumurtalik county of Iskenderun Bay;

Akfen Energy group 450 MWe thermal power plant in Yumurtalik county, in feasibility stage;

CEZ Czech with local Aken in Erzin county of ıskenderun bay for 900 MWe naturalgas firing new combined cycle power plant, with EIA certification.

However, it now appears that Iskenderun is a high-risk zone for new investments in our region with relatively higher risk insurance premiums. That is the cost of the latest developments, and since investors are to pay, so are the consumers.

Last but not least, Akkuyu Nuclear power plant site is approximately one hundred km west of Iskenderun bay, and within reach of the same risk exposure. Therefore the nuclear power plant construction site selection is to be reconsidered under the light of new developments in the area.

We are displeased by the possibility that any insurgent group or any hit team of a rogue state with portable missiles mounted on speed boats could attack existing or future onshore thermal power plants if necessary defense measures are not taken immediately.

In the end, we would advise that investors are to reconsider new thermal power plants at minemouth locations based on firing local indigenous coal.

Haluk Direskeneli, Ankara based Energy Analyst,

Wednesday, May 26, 2010

Sinop Gerze information note on new thermal power plant investment

Dear Colleagues, Dear Energy Professional,

As Energy Working Group of Chamber of Mechanical Engineers, we visited Gerze town on 22nd May 2010 Saturday afternoon. We got information on new investment for a new imported coal firing thermal power plant. A hardcopy of EIA application report is received. We have reviewed the possible site which is considered for building the new plant at Sinop province Gerze county YAYKIL village.

On a narrow coastal sea shore of about 200 meters, approximately 400 acres of farmland extended backwards is considered for this new investment. At the edges of the selected agricultural / forest land, 108 acres of selected land is covered by forest.

Samsun-Sinop highway is on the west backend and 154 kV electricity transmission line is also very close. In the north, a small river reaches the Black Sea coast line.

Samsun Gerze double road is under construction. The road is in a mess as of last week. There are infrastructure bridge constructions and ongoing works for asphalt road surface coating. We passed 100 km in two hours at very low speed.

There is a new Airport at Sinop. There is scheduled THY flights to Istanbul every day.

Here is my observations and comments on new Gerze imported coal firing thermal power plant as follows,

1. Although the locals express that they did not sell their land to the investor, one should note that is not important. If the investor obtains EIA certification and EMRA license, then upon investors request, public authorities can initiate the expropriation of the required land for the new thermal power plant. Legal advise is necessary.

2. I have read the available application to EIA report three times. Other than the birds insects flowers section, the report is very premature in content, very simple, lack of technical details, very rouge and careless as if it is saying in comfort that "We know this business, we do not want/ need to specify the details, you are illiterate, you do not know these issues, in any case we shall complete this investment despite of your objections, and you have no ability no power to stop us".

3. After a very narrow coastal sea shore of about 200 meters, there is an extending land in S- shaped backwards already in agricultural works in the new thermal power plant proposed site. Planned 1-km jetty will not be suffient and in the longterm it will be extended to at least 4-kms which will adversely affect the nearby fishery. This 400 acres of agricultural land is not enough for the new thermal power plant in the long run. There is small space for Coal stocks in small lanes in the draft project layout, similarly a small ash disposal pit just for 1-month storage. There is not space for ash dam. A small land of 400 acres is not enough for the new thermal plant for sure. A similar imported coal plant in Sugozu Isken has site for more than 1000 acres at Iskenderun bay on the Mediterranean coast. Therefore future expropriation and more land purchase is inevitable.

4. We chamber of mechanical engineers support thermal power plant constructions as long as they do not interfere the ongoing agricultural activities, and they do not pollute nearby air, sea and land environment. We have a clear attitude that new thermal power plant should not harm the environment, it should not interfere the interest of the local people. Coal intake facilities, seaport, coal storage facilities, ash disposal facilities, stack flue gas emissions, deep sea disposal facilities should not harm the existing neighborhood, and should be designed extremely environmentally friendly. In our country that is too difficult, since in case of any violation in operation, the penalties are not deterrent, and the plants continue to pollute the environment in the long run as we notice in the past similar references. There is no plant closure since we have chronic ever growing energy demand of the country as a whole.

5. However a thermal power plant investment can not be realized despite of the growing reaction of the local people. Future developments can be unpleasant. Thermal power plants around the potential future value of agricultural land loss is a very well known fact.

6. It is reported that the investor consultants (especially the academician) constantly insulted the local people. The academician can be a competent science person but her competence is in fluid bed firing technology whereby this plant will have pulverized coal firing equipment of the imported coal and that is not within her field of specialty.

7. It is our sincere feeling that the investor has not effective public relations activity for the new plant. You can not handle all PR through a fancy internet page. That is necessary for sure but not enough. A presentation to a limited number of people in a relatively expensive local hotel restaurant on a dinner table does not work. Gerze residents may not be engineers in profession but they are educated people with many different professions, and eager to defend their civil rights, and they have all access to legal platforms at all times.

8. On May 3rd 2010, a small summer vacation/ farm community with 6800 population gathered more than 10,000 people and expressed their reaction to the thermal power plant and this appeal is a serious situation. You have to consider your investment decision once again if you receive so high opposition. If you do not care, the consequence can be so harsh and there will be no winner.

9. There is incoming natural gas BlueStream pipeline in Samsun region. It is obvious that we shall have new combined cycle power plants in the region to utilize that huge incoming gas by maximized used of local engineering, local manpower, local fabrication. We chamber of mechanical engineers are too pleased to have more job more business more contract opportunities for our members, employment for the local people more business in our facilities as long as other colleagues in other engineering disciplines have favorable opinion.

10. This plant has 5.5 years of payback period based upon minimum buying price of the public regulations and within 2 years based on prevailing market electricity sell prices. In 2 years time, investor will have capacity increase plans for new additional 1200 MWe plant. Similar capacity thermal power plant in Sugozu already placed new capacity increase and made contract with the contractor.

11. 200 meter seashore will not be sufficient for coal unloading facilities for ocean coal shipment. New closed seaport construction is necessary. That means more land expropriation of the nearby forest land.

12. However, the objections of the local people has surpassing decision on our employment expectations, since it is high risk investment on neighboring community and for air, sea, and land/ soil environment. Therefore we would recommend the investor to evaluate the other land options especially on the Mediterranean coast in Iskenderun Bay since Russian coal is not so cheap any more compared to prevailing international market prices of the imported coal.

Respectfully submitted for your evaluation and further comments.

Haluk Direskeneli, Ankara based Energy Analyst,

Wednesday, May 05, 2010

Latest IPOs (initial public offering) in Turkey

Dear Energy Professional, Dear Colleagues,

We have recent IPOs (initial public offering) of Akfen and Aksa from our local market. The conglomerate Akfen and energy group Aksa are among several sizeable companies launching IPOs this spring, and the Istanbul Stock Exchange says it expects 15 to 20 new listings this year.

Akfen Holding, the Turkish construction conglomerate, plans to raise $500 million to $700 million in an initial public offering, potentially Istanbul's biggest since 2008, people familiar with the matter said. A total of 29.2 percent of its enlarged share capital will be offered, of which 85 percent is primary shares and the remaining 15 percent are secondary, they added. One third of the IPO proceeds will be used to pay down debts while the rest will be invested in projects. The bookbuilding process is expected to start on April 19. Turkish energy firm Aksa Enerji Uretim also launched a listing on the Istanbul stock exchange on Thursday, seeking to raise $400 million to $500 million.

Akfen is related with new airport constructions TAV and their operations. They are very successful in this business. There is little competition at this time, and business is booming in this sector- Akfen is also mobilized for new energy investments, new 800 MWe thermal power plant firing naturalgas in Samsun TekkeKoy, and 1600 MWe in Sinop Erfelek firing imported coal. They have these new licenses to construct the combined cycle power plant in Samsun where gas is coming from Blue Stream gas pipeline and the imported coal from Russia. That may create questions on supply security. Imported coal firing power plant investment is not so easy due to local public reactions. Combined cycle power plants are easy to construct, and easy to finance. Another 450 MWe naturalgas firing new thermal power plant construction is planned in the Iskenderun bay on the south Mediterranean coast. However it is not so easy to say that the company is well structured with new engineering staff but it is expected that they will have soon, since the company is originally formed to fabricate small size household steam boilers in the past.

Weakspot of Akfen is that it is a one-man company with greed and huge self esteem, but unfortunately with limited engineering staff. Akfen has to get restructuring and have better in-house engineering capability in the long term which is deemed necessary for new energy investments.

Aksa Enerji, one of Turkey's largest private power producers, is looking to get as much as $414 million in an initial public offering as the company aims to boost its share of Turkey's fast growing power market. Aksa plans to sell a 13.52 percent stake in the company, which could rise to 15.55 percent with a greenshoe option. The company said on Monday it targeted a price of 4.9 to 7.2 lira per share with the top end of the range bringing in 619.2 million lira ($414 million) and the lower end of the range fetching 421.4 million lira. Growth potential in Turkey's power production sector is huge. The country will need between $3-5 billion annually over the next five years in order to prevent power shortfalls as demand is seen outstripping current capacity. The company expects to finish bookbuilding for the offering by May 13-14. The company said it plans to make investments of $3 billion by 2014 to boost its capacity to 4,129 megawatts from a current capacity of 1,500 MW. It aims to hold a 10 percent market share of Turkey's power production industry by the same time. "Our growth will continue both organically and through mergers and acquisitions. Privatisations are within our areas of interest, especially (power) production privatisations and we are interested in distribution," said Aksa Chairman Cemil Kazanci. He also said that the company aims to boost renewable energy capacity to 1,100 MW from a current level of 130 MW. The company has allotted 70 percent of the offering to foreign investors and 30 percent to domestic demand.

Aksa company is known as diesel generator fabricator based on foreign licenses upto 2 MWe electricity generation. They are almost a monopoly in the local market. Company has good relations with Russian gas supplier. Company has strong engineering backbone to carry out all types of in-house engineering works. They are also interested in gas distribution privatizations. They have recently completed new 1500 MWe gas fired combined cycle power plant in Antalya region Selimiye Kovanli village. Antalya is the Turkish Riviera with many luxurious tourist hotels. That region had electricity shortage for many years in the past, especially in summer time for air conditions. New combined cycle power plant will erase that power shortage. However the plant cooling system is designed to agricultural water supply rather than air cooling which is more expensive That design may create drinking water shortage in the region since it is situated on the drinking water supply of underground supply of the region. The plant is operated now in simple cycle so there is little water consumption. Anyhow the plant will be operated in the combined cycle soon and the underground water supply will be used and that may create water shortage in the long run. Plant has to change the overall cooling mode to air cooling mode in the long run to avoid water stortage in nearby agricultural land and the population of Antalya region. The same plant has extension program to add 1000 MWe more in future.

Strong point of Aksa is that they are a family company with professionals plus a strong professional and experienced engineering staff on energy projects. Weak point is that they have lack of sensitivity on environmental concerns in their energy projects and reluctance to respond to local environmental reactions. That may not be a problem in the short term due to their close relations with the ruling administration, but in the long term that may create legal and financial problems.

Please do note that both companies have renewable power plant projects mostly in wind power also they are looking for a substantial share in hydro privatizations.

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