ON A BUZZ

Turkey 2014 | ENERGY | B2B: THE STATE SECTOR

The Turkish energy sector is diversifying in order to cut down on imports and promote sustainability, with the public and private sectors both engaged to make the plans a reality.

Kemal Yıldır
KEMAL YILDIR
General Manager
TEİAŞ
Halil Aliş
HALIL ALIŞ
General Manager
EÜAŞ

What role will foreign investment play in the development of the generation sector in years to come?

HALİL ALİŞ Turkey needs many more power plants to increase its electricity supply. The country needs new power plants to the tune of approximately 4,000 MW and 5,000 MW each year, and we expect the steep increase in demand for electricity to continue over coming years. We expect investment to come from European and Asian countries such as the Slovakia- and Thailand-based companies that will form joint partnerships for the Konya Karapınar basin, in order to construct coal-powered plants. We also expect other European countries such as Germany and Italy to finance new coal basins.

KEMAL YILDIR Foreign companies share an interest in electricity generation, and you may be familiar with the joint venture between E.ON and RWE, for example. Numerous foreign companies see the potential in entering the Turkish energy sector in light of the ongoing privatization of coal and hydropower assets. Furthermore, potential imports of coal from Russia, South Africa, and Malaysia bring value-added to the sector.

What role will EÜAŞ play in financing and incorporating the two nuclear power plants planned in Turkey?

HA EÜAŞ has no predefined role in the Akkuyu project. However, an intergovernmental agreement was signed between Japan and Turkey on May 3, 2014 regarding a second nuclear power plant to be constructed and operated in Sinop. The Turkish government will sign a host-government agreement with the project company to be established by potential project participants, namely EÜAŞ, MHI, Itochu, and GDFSuez. It is foreseen that EÜAŞ will be one of the major shareholders in the project company and our share will be between 30% and 49%. The Sinop Nuclear Power Plant project is considered an infrastructure development project by the government. The power plant will have 4 ATMEA-1 reactor units with 4,500 MW of total installed capacity. The commercial operation of the first unit is expected to be in 2023 and other units will connect to the grid in 2024, 2027, and 2028, respectively. The investment cost estimate is around $22 billion.

Is TEİAŞ destined for privatization?

KY TEİAŞ's business is in both generation and supply, and this is one possibility, although, strategically, transmission companies worldwide tend to be state owned. This said, Germany and Austria, among others, do have private sector participation. I believe that in Greece, too, roughly 40% of the transmission system is in private sector hands. The dynamics of the energy business have certainly led to greater private sector participation at the board level.

What strategies are being pursued to diversify Turkey's energy sector?

HA Turkish energy sources will include renewable, hydro, nuclear, and other thermal power plants. By the end of October 2013, 44% of Turkish electricity generation was derived from natural gas, which we import from Russia, Iran, and Algeria. Hydropower accounted for 25%, with an additional 25% from coal and 4% from renewables, mostly from wind. Our hope is that the use of natural gas will have decreased to 30% by 2023, and also that the number of nuclear and renewable plants will increase until 2023. From an economic perspective, Turkey's importing of primary energy fuels has a seriously negative impact, and we urgently need to establish renewable, domestic sources.

TEİAŞ holds a 30% stake in the new energy exchange (EPİAŞ). How will the exchange impact the Turkish energy market?

KY It is ultimately necessary to open up the market to the private sector. It is unacceptable for energy generation to be subject to infrastructure or supply shortfalls. The balancing market also involves transmission system operators, and EPİAŞ is already in place to ensure smooth sector operations, be it gas supply or pressure levels. The related legal framework is already being drafted to ensure this.