Latest privatization tender followup review

Dear Colleagues, Dear Energy Professional,

Thermal Power Plant (TPP) with 600 MWe in SeyitÖmer privatization tender is finalized with US $ 2.24 billion bid on 28th December 2012. Earlier, the nearby coal mine fields were owned by the Turkish Coal Board, whereas the thermal power plant was operated by the Turkish Electricity Generation Public Company, now both privatized. Contract is in two sections. TPP is for property sale. Coal field is for leasing for next 30 years.

The existing power plant is based on pulverized coal firing technology, which needs a relatively higher calorific value and less moisture. Here we have a poor quality approx. 2000 kcal/kg LHV, with high moisture. The direct pulverized coal firing technique can be successful only if you lower the moisture content with a higher the calorific value. 

Available local coal at nearby coal fields have a challenging content with very poor low calorific value, at about an average of 1996 kcal per kg, and with approximately 34% moisture, 43% ash, 1.34-1.50% sulfur. 

The power plant design is based on coal at 1500 kcal/kg lower heating value for units 1-2, and 1400 kcal/kg LHV for units 3-4.

The plant was built by reputable Western power plant designers (German, French, Italian) but they are quite old but still in operation at low availability. The first and second units were built by Stein Industrie of France and the steam turbines by Franco Tosi of Italy, both completed in 1973. 

The third unit was built by VKW of Germany, the steam turbine by Mitsubishi of Japan, and completed in 1977.  

The fourth unit Boiler Island was built by VKW of Germany, the steam turbine by BBC and the plant completed in 1990.

Pre-calculated Ebitda figures are not so promising, but expected to double after privatization with proper upgrading, better availability, and rehab spending in time.

TPP currently generates not more than 200m USD net cash per year. For 2.24 billion US Dollar price, expected payback is at high end with simple arithmetic. 

TPP needs minimum 200m USD for rehab to replace existing small ESPs with bigger new and add new FGDs, upgrade I&C to meet EU environmental norms by year 2018.

TPP electricity generation cost is 5.80 US cents per kWh which could be reduced to 5.00 with plant upgrading.

With 5 US cents per kWh net earning, the Plant can earn 200m USD per year with prevailing plant electricity cost and local PMUM market prices.

TPP plant overall availability is 74% or 6500 hours per year, which may be increased to 7500 hours by plant upgrading in time

TPP has 796 workers which may be reduced to 500 by restructuring and reorganization.

TPP coal delivery price is 2.80 USD per MMBTU which may be reduced to 2.00 by coal mine fields upgrading

Plant can sell electricity to national grid at PMUM price which is around 9-10 US cents per kwh at 24 hours average

With 200m USD annual net earning, 2.24b USD upfront winning price in privatization can have min 11 years payback, that is  less than 10% IRR

TPP has experienced senior top management and top engineers, new plant management should keep them and pay them better.

TPP rehabilitation and upgrading need careful planning, outsourcing and project management to spend min 200m USD by year 2018, for better availability and concurrence to EU environmental norms.

Nearby coal fields need better mechanization and better new coal machinery in open field mining to reduce coal cost to plant.

We hope that SeyitÖmer 600MWe privatization will follow Çayırhan example in upgrading, better operation, welfare to workers and nearby locals. Cayirhan TPP was in Transfer of Operational Rights (TOOR), whereas Seyitomer TPP was property sales.

We do not know details of contract management of the newcomers of SeyitÖmer, but we would recommend them to work with top local consultants.

In Kütahya SeyitÖmer coal fields, expansion is another tender on 26 March 2013 for leasing Kütahya Domaniç coal fields to build new TPP with capacity at  >300MWe TPP.

We hope that SeyitÖmer will be another success story in future for next 30 years and more. It will bring prosperity to workers, and locals with better operation, better availability, with complete compliance to  tight EU environmental norms, with better rehabilitation and plant upgrading.

We have lignite coal as our biggest fuel source and we all agree that we should use that coal with:

maximum efficiency and availability,
maximum contribution to society,
minimum harm to mother nature,
minimum impact on global warming,
maximized employment for qualified local labor,
maximized employment for local engineering
and maximized employment for local contracting.

We hope that this brief report, although it needs continuous updating, will provide the interested reader a frank view of the Seyitömer Thermal Power Plant. This article is an independent work which was prepared with the available information as received at the Seyitömer Thermal Power Plant, and attempts to illustrate a candid picture of the existing situation. It is free for any public interpretation. 

Your comments are always welcome. With deepest regards...

Happy new year to you all...

HalukDireskeneli  at gmail.com, Munich, Germany

Haluk Direskeneli is a graduate of METU Mechanical Engineering department (1973). He worked in public and private enterprises, U.S. and Turkish JV companies (B&W, CSWI, AEP, Entergy), in fabrication, basic and detail design, marketing, and sales and project management of thermal power plants. He is currently working in Ankara as freelance consultant and energy analyst with thermal power plant basic/detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the Chamber of Turkish Mechanical Engineers Energy Working Group and METU Alumni.

SeyitÖmer for Sale, last minute hints for investors

Dear Colleagues,

Long awaited Public Auction will take place on 28 Dec 2012 Friday afternoon, at 1500 hours. We would like to remind you the last minute recommendations on the pricing and risk appetites of participants, herein below.

Investor risk appetite is too high in Seyitomer 600 MWe Thermal power plant privatization, final price may exceed 1b$ on Friday.

Seyitomer 600 MWe thermal power plant sales in privatization will be an excellent application for John Nash's Game Theory. Put a ceiling to your financial capacity and do not exceed that treshold.

Seyitomer 600 MWe Tpp price is first estimated to be between 500-700 million $, however now more than 1b$ considered in market due to high participation. That figure may reach higher but at that time becomes unrealistic/ unreasonable/ difficult to finance.

Ebitda in SeyitÖmer is not so good under upfront estimations at this time, however project is promising to be twice after privatization, that is why investor risk appetite is high.

Investor should consider additional expenses for new ESP to exceed 10mEuros cost, and new FGD to exceed 20mEuros, plus I&C and other equipment renewals for each of total four units in rehab within next 5 years until year 2018. Total rehab cost is estimated to be approx. 200m US Dollars.

Investors should take calculated risks and are not to be blindfolded gamblers in Seyitomer

Pre-qualified groups are as follows,

- Torunlar-Eren JV

- Doğan Energy Investments

- Altek Alarko Electric Power Plants

- D Enerji  Generation and Investments

- Ayen Enerji 

- Park Holding

- Özkar Construction

- Aksa Energy Generation

- Elsan Electrical Utensils

- Limak Construction

- Çelikler Contractors

- Eti Bakır

- Bilgin Enerji-Suba JV

- Kolin Construction

- IC İçtaş Enerji -Fernas Construction JV

- Konya Şeker.-Siyahkalem Mühendislik JV

  

In Seyitomer 600 Mwe tpp sales, risk is in nearby coal, coal price is approx 3.30 US$/ MmBtu which may be reduced to less than 2.00 USD/MMBTU with further investments.

Overall electricity cost was 5.80 US cents per kWh in year 2011.

Plant generated 3.896b kwh in year 2011 with average 74% availability. Availability may get higher after privatization during upgrading.

16 groups applied for 600 MWe Seyitomer thermal power plant privatization pre- qualification

Open auction for 600MWe Seyitomer TPP privatization is on Friday at 1500 hrs between 16 pre-qualified participants.

Please also do note that Plant is on the remote mountain region, 25km far from Kutahya city center, with almost no major dwellings nearby, so there is almost no local reaction, almost no risk of EIA.

Valuation of a generation asset is not only taking into account financial and operational figures. It also covers strategy, risk appetite, market share and possible upstream and downstream integration(s). 

Aggressive risk appetite of local groups are very different than reputable global energy players. 

Your Comments are always welcome. Best regards

HalukDireskeneli at gmail.com,  Munich, Germany

Energy and Infrastructure Forecast for new year 2013, Risks and Opportunities

Dear Energy Professional, Dear Colleagues,

We would like to make forecast in our local energy markets in the New Year 2013.  Economy and business future is always shaped by expectations. This is evaluated by economists, and there is one Nobel price given in year 1995 for shaping future with expectations. Market expectations are important in economic forecasts globally as well as locally.  

At the beginning of each year, there are many economic forecasts made by the nationwide daily newspaper columnists, however as we all see there are almost none made in energy markets.  Within our capacity, we tried to outline draft forecast albeit maybe somewhat irrational/ unfair for the New Year. Anyhow it is better to have one, rather than none. Here are expectations for the New Year 2013;

In early days of 2013, Iran will again cut-off Natural Gas flow due to excessive needs of her own domestic market due to harsh winter conditions for at least 1-month. Russians will increase supply capacity in the Blue Stream for a substantial premium as usual.

"Gold for Gas" barter between Iran and Turkey may end due to US sanctions over Iranian exports. That may stop gas from Iran for the long term. Turkey should look for alternative energy sources for supply security.

Iranian Nuclear strike capability makes MiddleEast countries nervous. So Rival Countries may initiate direct surprise attack(s) which may lead to global energy crises in the world. So we should have increased underground gas storage capability and bigger fuel storage facilities for short term 90-days emergency. Any conflict which will last more than 90-days will be a catastrophe.

“Each and every incentive/ every good intention are abused with extreme care”, so political power is expected to be reluctant to issue new energy incentives. 

Russians will outsource in Akkuyu Nuclear Power plant, starting from local civil works, high capacity steam turbines, instrumentation and controls, due to experience on serious shortage of available commercial financing. Since the project is not commercial, but now purely political, it is only possible through political project financing. Hence it is not so easy to finance the complete project from one source. Political risks of a nuclear power plant project cannot be properly estimated; hence non-commercial project has no commercial meaning.

Sinop Nuclear power plant project will be evaluated by interested parties including Chinese, South Koreans, Canadians, French and again Russian counterparts. We suspect if commercial companies can secure approx. 20 billion US Dollar project financing during Euro Zone credit crunch days and fiscal cliff in the USA.

We expect new investment initiatives on new found coal mine fields in order to build new thermal power plants under locally developed clean coal technologies.

Hamitabat 1120 MWe (1154 MW after rehab) output capacity gas fired combined cycle power plant sale date is twice postponed, and now new auction is scheduled on 14 January 2013. There are 4 pre-qualified groups. 

Kütahya Seyitömer 4x150 MWe local coal fired plant auction is scheduled for privatization on 20th December 2012. Sivas Kangal coal fired 3x150 MW thermal power plant will be sold on 17th January 2013. These dates could be postponed if two or more pre-qualified participants ask for  new time extension.

Next Manisa Soma 1034 MWe power plant, then Çanakkale Çan 2x160 MWe CFB are expected to be auctioned shortly. These thermal power plants auctions are property sales, but coal basin are in transfer of operating rights for next  30 or more years.

Local coal firing new thermal power plant constructions are in progress. Kütahya Domaniç coal fields for construction of new 300 MWe Thermal Power plant will be leased on 26 March 2013. New tenders for operating coal fields of Konya Karapınar, Eskişehir Alpu, and Tekirdağ Saray will follow

Russian Natural gas price at German border was 419 US Dollars per 1000 standard cubic meter or 10.56 USD/MMBTU as of November 2012. For European customers, the price soon is expected to exceed 500 US Dollars per 1000 standard cubic meter in year 2013. That is approximately 13.00 USDollars/MMBTU.  We surely have same figure for our local market. Hence we expect less number of investments for new natural gas fired  Combined Cycle power plants due to increasing Current Account Deficiency (CAD).

Thermal power plant investments in NorthWest BlackSea coast are expected to be on hold for a while due to  ongoing EIA scheme, and high reaction of local environmentalists. 

Local Regulation of foreign personnel employment is changed, so cheap foreign employment will not be possible.

Situation in Gerze seems getting out of control. Smart investor should stop further push and direct available investment funds to some other sectors.

BlackSea hard coal underground mine fields leasing scheme is finalized. Companies will look for a nearby seaside empty land to build new  thermal power plants.

Spot imported coal price for 12,000 BTU per lb HHV is currently around 85-89 US Dollars per metric ton FOB seaport basis. That is approximately 3.30 US Dollars/ MMBTU. We presume that price will be kept at that  level in year 2013. Current account deficit (CAD) is in severe situation due to increased spending on imported coal and imported natural gas purchases at intolerable levels. Increased use of domestic coal / energy sources  will be encouraged..

Almost all existing thermal power plants are in privatization, but investment appetite is low because of the ongoing global economic crisis. Privatization tendering process will continue in second half of next year.

Turkey is still at very low annual per capita electricity / production / consumption with approximately 3000 kWh, EU current average is 10K; North American average is 12K. Local markets need more generation.

Western Foreign investors have lost their appetite; domestic investors do not have money, however investors of rich Middle East countries may have increased appetite.

Local design, local production, local engineering do not exist yet..

Western natural gas pipeline supply by Russia's Gazprom will be placed to local companies.

HEPP and thermal projects receive severe reactions of local people, and reactions will continue on all legal platforms. 

In recent popular social media, investors are more or less incorrectly/ but implicitly represented as negative profiles, it is alarmingly too deceptive. How that profile will be corrected in public image?? That is to be worked on.

Due to ongoing high environmental pollution, no sufficient filters, no desulphurization, no rehab, therefore we recommend that  Unit Afsin Elbistan-A, should be shut down, dismantled and sold as scrap. However there is still ongoing negotiations for privatization.

On the other hand Elbistan Çöllolar landslide disaster was forgotten after the event. Reutilization should be enforced after legal procedures.

Afsin Elbistan C-E tendering is in document preparation in central procurement department of the authority with foreign consultant, anyhow too much time/ effort/ money is consumed if not wasted.

Rehabilitation of public thermal power plants are almost completed,  their privatization will be completed in year 2013.

Construction of Thracian Submarine energy transmission which will cross Dardalennes Channel will be completed in year 2013.

East Med Cyprus offshore drilling work did not reveal expected results. Offshore Contractor Company is not comfortable with the early results. South Cyprus media and government still push positive expectations, trying to keep the case in agenda, but the situation seems not so promising, the investor does not want to gamble any more, return is not earlier than 10 years in time...

No hostility foreseen between Greece, Israel and Turkey, however pushing for fair share of nearby natural resources is the rule of the game in international politics.

Black Sea drilling is a never-ending story, everyone is talking about very large reserves, but there is nothing in reality.

Investment appetite in Wind capacity is almost saturated, Environmental concerns will be on the agenda. We have no utility size pumping storage HEPP capacity yet.

Investment in Solar energy is still very little, without making local fabrication of the solar equipment; one cannot go further with expensive electricity generation.

Electric cars / buses are in agenda, but we shall all ask who will be paying high cost of new transformers due to additional heavy pulse load.

How do we run away the climate change obligations? We shall have low profile participations of the public sector.

TransAnatolian Pipeline project is in fast-track agenda. Nabucco is almost forgotten.

Oil prices per barrel may rise next year due to ongoing financial risks.

Slowdown in demand for electricity in the first quarter is more likely.

Construction activities for Submarine HVDC cable, gas and water supply pipelines from Turkey to Northern Cyprus will continue.

Change of power in Syria is not foreseen in the short term. However influx of refugee number will get increased to almost 1 million by the end of year 2013. It is too alarming situation. We shall need approximately 4 billion US Dollars to be spent for the incoming refugees within our territory per year. This is a great burden on our economy.

In case of Assad leaving Syria in future, there could be misfortunate massacres of thousands if not millions by  Al-Qaida insurgents. 

Turkish natural gas demand will begin to fall, probably by the second half of the year.

Accelerated increase in local fuel prices, is expected,

Due to low investor appetite, Privatization strategy will be reconsidered in order to increase the ongoing high income based tendering process.

Turkish oil law will be reevaluated, again,

Ministry of Environment will be  in restructuring. The secondary legislation is still pending.

We expect reorganization as well as restructuring in Ministry of Energy and Natural Resources in order to reduce staff, to reassess duties and responsibilities...

Similarly EMRA also needs to be reorganized and restructured, and Agency may be divided into two, maybe three. EMRA licensing will go on with reduced speed, copy / paste applications for license overrun archives. Rejection is less than 2%.

Euro and US Dolar both are expected to depreciate. USA fiscal cliff will be on the annual agenda.

Turkey will enter into a period of nationwide frenzy general elections in year 2014. In new general elections, all of 3-term MPs will leave Parliament and from Ministerial posts. Ministers of  Energy, Finance, Treasury will leave. Economy will miss strong leadership, and public experience. That is an important risk.

Euro Zone crisis and US fiscal cliff will continue in 2013. So reduce your expenditures, reduce your spending, reduce your borrowing, stay cash, stay liquid. 

We were able to predict this much. Everyone in business environment says that 2013 will be another difficult year.  We shall be too pleased to receive your comments/ contributions in the New Year. Happy and Prosperous New Year to you all!

HalukDireskeneli  at gmail.com, Munich, Germany

Haluk Direskeneli is a graduate of the METU Mechanical Engineering department (1973). He worked in public, private enterprises, U.S. and Turkish JV companies (B&W, CSWI, AEP), in the fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant and energy analyst with thermal power plant basic and detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the Chamber of Turkish Mechanical Engineers Energy Working Group. 

Turkish Russian relations as of 2012

Dear Readers,

I am reading 1949 Lebanese-born French writer Amin Maalauf'un latest novel, "Far East". I draw parallels with today's Syria, Lebanon and the rest of the Middle East. I believe that we have to take lessons through the similarities, leading present world situations between Israel and Gaza.

In the past I spent a lot of time for marketing industrial installations in Syria, Israel and Jordan, and the Middle East. We got good / profitable orders. Syria was a business environment  very similar to ours in Turkey, properly functioning business climate where we could earn money. However now it is all over, unfortunately there is no way to make any business at least for next 10-years.

Syrian market was ours due to close border neighbor and natural similarity. Unfortunately, there is no longer we have the old Syria any more. Damascus, Aleppo, Homs, Diar-Ez-Zor  are now all in ruins due to war torn clashes between government forces and foreign backed insurgents. We do not know how the new Syria will be created, how the new economical environment will be initiated and put into functioning once again.  However, if you want to avoid a war, you always have to be ready for war.

We are not Arab, we are Turkish. We do not have a common language. We have our own democracy, our own political system. There is no need to lead the Middle East nations, nor any need to be a role model. Each one of them should create their own political system based on their historical and cultural heritage as well as their geography. 

Turkey created her own international political system as formulated "peace at home, peace abroad" which was tested during WW2, validated, proven correct for our own location. based on  "non-interference in the internal affairs of other neighboring countries. 

When you get involved into internal conflicts of others, the situation hurts you economically, politically. Trade relations stop, you loose money. You loose markets. Now we have more than 130K Syrian refugees in our border regions all unemployed in need of our humanitarian help. We have already spent more than 400m USD in the last 6 months since conflict is initiated.   Rich Syrians and their families have already left soon after they arrive to Turkey for Europe and elsewhere with money they allocated looking for refuge. 

***

There is an important Russian naval base in the sea port town of Tartus, on Syria's Mediterranean coast. This is the most powerful logistical support for Russian Naval ships receive in the Mediterranean Sea. Assad's government has given that base to Russians to get their military, political and financial support.  Almost all Russian naval ships get their logistical support, food, fuel, maintenance in this naval base. This base is life support of Russian Navy. Russians can not risk to loose that seaport for any other reason. They dot even negotiate.

In foreign affairs, there is only one mission, it is your national interests. Democracy, human rights, humanitarian sentiments are useless. It is not your job to bring democracy to other nations. It is not your responsibility to solve internal problems of other countries. You should have close, equal, profitable relations with all your neighboring countries including Russia, a super power nearby. You should pay attention to Russians' red lines, sensitivities, interests, military concerns.

Russia is our close neighbor, not placed on the overseas. We have close economic/ trade/ social relations hoping to reach more than 100 billion US Dollar mutual trade volume soon.  By ignoring the defense sensitivities of our major neighbor on the North, we can not continue friendly relations which would lead our mutual prosperity.

Russia, is not the former "Soviet Union" any more. They have their own version democracy still in creation for better functioning to bring prosperity to Russians, respect its own citizens. Market forces settle slowly. Russians are not "Comrades" any more, but they are repositioned as highly qualified educated competent business-people, business men and business women.

Today in front of Kremlin walls, there are no more old Soviet cars, but all of them are made and supplied by high quality BMW, Mercedes, Audi. They have money, they buy the best available in the international market. There is hard feeling for local fabrication. They have their own high tech technologies, space,  military aircraft, nuclear, defense weapons. 

Under strict surveillance of government hosts, I spent a short visit to some of the selected industrial sites  in Western Siberia in year 1976 under the auspices of United Nations. Russians had a few UK Rolls-Royce design gas turbines with small size output.  They had reverse engineering and produced hundreds of them. In case of any need for 100-Mwe, they would install 10x 10-MWe simple cycle gas turbines of their own, where we would install 2x50-Mwe from a reputable Western supplier. 

Nowadays they have money to spend, so they buy the best, and not bother to manufacture by themselves any more.  Our local contractor companies have many orders to build combined cycle power plant in Russia from West border to Poland to the east Pacific Ocean shores in Kamchatka Peninsula.

Our Northern Neighbor have received Akkuyu Nuclear Power plant order within intergovernmental agreement based  full financing by themselves. All industrialized countries have nuclear power plants. We may also have one of ours. You may be opposing to run a plant but that is a reality. Let us do it properly, under our own supervision together with internationally reputable owners engineers.

Without competitive market tendering, projects under intergovernmental agreements are too dangerous for the purchaser/ as well as supplier countries. When Aswan Dam in Egypt was in design stage,  Suppliers had no available high- capacity, high- head hydro turbines for desert site. All their water turbines were suitable for the rivers in northern Siberia. Anyhow they decided to install whatever available at that time. Turbines worked at first and generated electricity in Aswan, but in the long term they had random failures in need of  frequent repair and rehabilitation in desert environment.

We have similar experiences in our country with similar design and supply of industrial installations, such as Orhaneli 210 Mwe thermal power plant steam turbine, Seydişehir Aluminum producing facilities, Iskenderun iron and steel mills, Petkim Aliaga refinery. 

Designs were based on cold Arctic environment whereby our sites had tropic weather conditions. So we need to evaluate Akkuyu Nuclear power plant designs carefully. Nuclear power plant designed to cold Arctic environment may have difficulty to cope with our tropic Mediterranean coastal regions. We all wonder how the designers will handle plant cooling system with available warm sea water nearby.

Do you prefer to buy an industrial plant designed and fabricated by our Northern suppliers? When was the last time you purchased an industrial product? Please do advise a brand name with high quality. If it was your free choice, would you prefer to buy AirBus or Boing airplane or Tupolev? When was the last time you flew on Tupolev?

There are unconfirmed unofficial rumors close to circles of Nuclear industry that the suppliers would prefer to supply the nuclear core only and would prefer to outsource the rest, steam turbines, instrumentation and controls, boilers to other reputable sub suppliers provided that they furnish their Exim financing themselves. There are rumors that German Siemens- Kwu could supply Steam turbines under germany or European Union Exim financing. 

***

We have young College students to get higher education in Russia on the nuclear power plants. Last year they learnt Russian language. They have at least 5-more years to get graduation. During that period their number will reach to almost 400. Russian university environment is not like ours. Sexual freedom is beyond our understanding. Young men and women over the age of 15 have an absolute sexual freedom. Our sense of morality, are not valid there.

How do they cope with that environment? We chose them based on their technical and scientific qualifications, and then we send them to the Ocean to learn swimming by themselves. How will this work? How do they protect themselves? When they finish the nuclear education, could we ask them to get control/ full responsibility of the nuclear power plant with limited experience? In your own industrial plant, how many years of operation experience do you ask from a newcomer young engineer?

***

Russian President Vladimir Putin was in Turkey on Monday December 3rd 2012 for 8-hour scheduled working visit to evaluate ongoing foreign affairs and economic cooperation. We wish to have similar high level face to face meeting more often either here or there. It is important to express and evaluate your needs, common denominators, mutual interests, sensitivities. Translations can be done wrong. Consultants/ experts may mislead. There is nothing better that face to face communication between high authorities to find mutual satisfaction in problem areas. We have much to learn from each other. It is essential that we should keep open all information and communication channels in international relations.

Vladimir Putin is well educated- multilingual, rational and very realistic head of state.  He holds PhD degree from University of Leningrad- Saint Petersburg on International Law and Economics. He speaks fluent German, he understands but does not necessarily volunteer to show his ability to speak English. He knows his capabilities and what he wants. It is good to have a competent counterpart in international relations.

These are important. U.S. Secretary of State does not know a second international language other than English.  Hillary Clinton will soon leave her post, her replacement Susan Rice similarly does not speak any language other than her own. 

***

Our relations with Russia during cold war was bitter if not nasty. But now walls are down, cold war is over. We have more than 80K qualified Turkish workers in Russia for contracting business activities, constructions of high rise buildings, power plants, industrial installations.

We have more than 200K weddings between Russian and Turkish nationals, 140K of multinational families live in Russia, 60K are in Turkey, mostly on Mediterranean coast Antalya region. They are mostly Russian brides but also there are slight increasing number of Russian grooms. Russian brides are cultural-wise grandchildren of Tolstoy, Dostoyevsky and Tchaikovsky. They are beautiful, highly educated. Many of our 400 nuclear students will soon get married with Russians in future for sure. So we shall have more multinational mixed marriages. Russian language will be commonly used local language in our local families. I would expect more number of in-laws in our communities.

***

Please do note our high dependence on Russian natural gas. We generate almost 60% of our electricity from natural gas, mostly supplied by Russian sources. Our "Current Account Deficient" is too high. This is not acceptable in the long term. We should reduce it. We should also reduce our foreign supply natural gas dependence.  Please also do add dependence on imported coal and nuclear fuel in the long term. 

These are emergency rings on our balance sheets. We must reduce our dependence to acceptable lower limits in the possible period of time. We have to open new joint ventures, promote new business together. Thanks to internet, we have now more free and independent social and political environment in future.

In 1976, under the auspices of the United Nations, I spent 3-months in Russia. Later in 2008, after 32 years I went to Moscow and Saint Petersburg for 1-week in a touristic tour program. 

I sincerely feel that Russian people are the same. There is certain but slow change from Soviet economy to market economy. Russian Citizens are now more comfortable with market economy. Black market is mostly vaporized, but  service sector is still not so good. Strict state scrutiny is mostly vanished. Vodka is Out, Beer is in. Women are still very beautiful. Men are more in business manners. Ballet- Opera performances are great, but very expensive. On the road, you ask a direction for an address, 10 or more locals come to help you. If they can not help you on the map, they take you to the address you ask by themselves.

Good neighborliness, mutual trust, friendship and cooperation form the basis of Turkish-Russian relations, which Turkey seeks to further develop to serve the mutual interests of both countries. Concrete results of our cooperation can be seen in the energy and economic fields. Let us believe in synergy of working together and hence let us stick to our tested motto "peace at home, peace abroad" which is the major requirement for survival as an independent nation in the Middle East environment.

*Haluk Direskeneli is a graduate of the METU Mechanical Engineering department (1973). He worked in public, private enterprises, U.S. and Turkish JV companies (B&W, CSWI, AEP), in the fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant and energy analyst with thermal power plant basic and detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the Chamber of Turkish Mechanical Engineers Energy Working Group.

Moscow and Saint Petersburg in year 2008

Dear Colleagues

Your writer was in Moscow and in Saint Petersburg Russia in early September 2008 for face-to-face business development communications. The first visit to Moscow was in winter 1976 through an United Nations scholarship on professional educational opportunity.

After a long period of 32 years, it was a real shock for your writer to witness the tremendous change in the daily life. Surprisingly some issues still are not yet changed in the local minds and attitudes.

It is your writer's sincere feeling that our northern neighbor is not communist any more. Russia is not "Soviet Union" any more. Russians are not "Comrade/ Tawarish" but business people. They are now trying their best to pretend purely capitalist in mind, more self oriented. Furthermore they look like a bit oil rich Arab country, in a different climate, with more trimmed and proud of their intellectual capability, historical and cultural heritage.

There are lots of SUVs, Jeeps, BMWs, Audi's on the road. We are told that they stopped to fabricate Volga, Zil, Lada cars, since better cars are manufactured by others. They have enormous amount of energy resources, so they produce oil and gas. Their famous subway system is still in good condition although all types of infrastructure needs huge amount of resources for upgrading.

Moscow streets are full of lovely beautiful young ladies on high heels, all with ipods and cellular phones, and handsome sportive looking young local businessmen with laptop PC bags and again with cellular phones in nonstop talking, all seem confident in their own future.

They have all sorts of consumer goods in their new supermarkets/ or so to speak in their superstores. They have all international brand stores, luxury goods for those who can spend.

Vodka is out, beer is in. Bolshoy Opera/ Ballet House was in renovation but all seven (7) other opera houses were in use. We had the opportunity to see one extraordinary ballet, at 150 US Dollar per seat - per ticket on last rear row.

In the private/ and legal exchange booths 1 US Dollar is approximately 25 Rubles. Entrance to Kremlin Square costs you 550 Rubles, daily tour in Tretiakov Gallery costs 300 Rubles, daily tour in Hermitage museum costs 500 Rubles, one metro ride costs 19 Rubles, one fast food big menu in McDonalds or KFC cost you 200 Rubles. Boat tour in Neva River or in Moscow Channel will cost you 400-500 Rubles as of  2008.

Russian people are generally sincere, helpful in nature in their private lives; however it is my sincere feeling that their service sector is almost in complete disaster. Their service people are still too slow, also rude, arrogant, they need life long training for better service.

In order to overcome communication barriers in doing business, you must learn Russian. Hence you can also communicate with beautiful daughters of Pushkin and Tolstoy and Dostoevsky, and break ice in your communication. Please do note that every educated intellectual Turkish man traditionally looks for his own Vera Tulyakova since Nazim Hikmet.

There are great opportunities to make more business in Russia. There are many projects to demolish the old Khrushchev era poor housing units and rebuild new luxury residences, better housing complexes. There are investment plans for new thermal power plants gas and/or coal fired. Their local companies can not satisfy/ fulfill all these new investment plans.

At this time Turkish Contractors Enka, Tekfen and Gama are in Moscow, and newcomer Renaissance Construction Company is in Saint Petersburg with many construction orders surpassing 30 billion US Dollar equivalent as of year 2008. (Ref. DEIK, Ministry of Foreign Trade)

There are five Turkish commercial banks operating in Moscow, and the total amount of direct investment is around $2 billion, including some portfolio investments. Turkish companies such as Enka, Sisecam, Zorlu, Beko and Efes have high portfolio shares in the Russian market. (Ref. Ministry of Foreign Trade)

By the year 2008 we will be purchasing almost 30 billion standard cubic meters of naturalgas from Russia. Energy will continue to play a major role in relations between our countries.

Turkish companies should move to more specialized high-tech engineering scopes other than simple ground laying, foundations, and mechanical installations.

In these difficult times of financial crisis, Lehman Bros and Merrill Lynch on the Wall Street, overseas international markets are too far away and too risky. There is no point to try to please those far away overseas clients with so minimum outcome, rather than leaving the closer market at our north. We have a great market at a very close distance to our land at our north and all we have to do is to be more close to that market and satisfy their market needs.

On the other hand ongoing nearby Georgia nor Syria problem are not our conflict. There is no gain, nor any interest in our involvement. Pipeline operations will have ups and downs in such mega project, which is the obvious nature of such operation. We should stay firm on our positions and get no involvement whatsoever.

Turkey is uniquely positioned as a bridge between the East and West at a crucial time for the European Union and the world in general. 

The primary objectives of Turkish foreign policy are to establish and to develop friendly relations with all countries, non-interferance into internal affairs, in particular with neighboring ones; to promote and to take part in regional and international cooperation; to resolve disputes through peaceful means and to contribute to regional peace, stability, security and prosperity. (Ref. Ministry of Foreign Affairs)

Russia, whose relations with Turkey date back centuries, has always been an important neighbor. The break-up of the Soviet Union and the emergence of the Russian Federation marked a new phase in Turkish-Russian relations. Both countries share the aim of working towards the enhancement of peace, stability and economic well-being in the region.

Currently, good neighborliness, mutual trust, friendship and cooperation form the basis of Turkish-Russian relations, which Turkey seeks to further develop to serve the mutual interests of both countries. Concrete results of our cooperation can be seen in the energy and economic fields. Your comments are always welcome


*Haluk Direskeneli is a graduate of the METU Mechanical Engineering department (1973). He worked in public, private enterprises, U.S. and Turkish JV companies (B&W, CSWI, AEP), in the fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant and energy analyst with thermal power plant basic and detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the Chamber of Turkish Mechanical Engineers Energy Working Group.