South Korea worries about risks related to Turkey’s long term stability
A month ago the buzz was that Turkey would ink a deal for its second nuclear power station. News media reports from South Korea and Turkey suggested another victory for the same consortium that won a $20 billion contract with the United Arab Emirates just a year ago. Not so fast.
Turkish English language press reports indicate the two countries failed to agree on a number of critical issues. Worse for South Korea’s prospects, Turkey has opened negotiations with Japan’s Toshiba.
The main sticking point between South Korea and Turkey is the delivered price of electricity from the reactors once they enter revenue service. Of course, that depends on the cost of building them. Following the money trail one comes to the issue of risk management and who would be left holding the bag for cost overruns.
Turkey’s merchant model
The expected value of two 1,440 MW reactors and related infrastructure was said to be $10 billion. According to an analysis published in the Korea Times Nov 21, Turkey wanted South Korea to finance the project on a turnkey basis.
South Korean officials are reportedly worried about Turkey’s long-term stability and in its capricious past in starting and cancelling prior nuclear projects. South Korea insisted on stronger guarantees from Turkey’s government and a better price to take risk into account. A financial failure in Turkey could impact South Korea’s efforts to gain market share in future projects where the government is more stable.
Opening for Toshiba
Three days after the talks between Turkey and South Korea broke down, Turkey’s Energy Minister Taner Yildiz opened discussions with Toshiba about building a nuclear power station at a site on the Black Sea coast. Toshiba is reported to be discussing its ABWR 1,300 MW reactor rather than the Westinghouse AP1000.
Two years ago when Turkey offered the tender for its first nuclear power station, Westinghouse executives refused to consider bidding on it. Their view that the process would not end happily was borne out when all the bidders, except Russia, walked away from the process due to Turkey’s refusal to provide guarantees related to protection of intellectual property and an agreement of purchase of electricity from the plant.
Turkey’s first nuclear power station will be built by the Russians at Akkuyu in Mersin on Turkey’s Mediterranean coast. The facility will involve four 1,200 MW VVER reactors. Turkey has guaranteed it will buy electricity from the plants at market rates for the first 15 years of operation.
The Russians are providing much of the financing and expertise needed to build the reactors. Also, Russia will supply fuel for the reactors and retrograde spent fuel insuring that Turkey will not need uranium enrichment nor spent fuel management facilities.
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