Saturday, December 29, 2012

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, 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.


Anonymous Anonymous said...

Dear Mr. Direskeneli,
Your article is very valuable to gain more detailed information about Seyiomer TPP. You say, by your own words : "We hope that SeyitÖmer 600MWe privatization will follow Çayırhan example in upgrading, better operation, welfare to workers and nearby locals." It is important that these two plants are not privatized under the same condition. Please remember Cayirhan TPP was transferred to a private company by Transfer of Operational Rights (TOOR). Under this contract electricity sale guarantee has been given to the new owner of Cayirhan TPP, but there will be no guarantee for Seyitomer TPP. The new owner company has to find its own consumer under free market conditions. Apart from this, I also wish that the new company to supply better operation, welfare to workers and nearby locals.
hoping to see your new valuable comments about the electric sector.


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