Monday, January 24, 2011

Brazil talks turkey with France, and so does Turkey

When it comes to new nuclear reactor contracts, where you sit in world diplomacy matters

frenchpressBrazil and Turkey are two nations with growing economies that want nuclear energy to provide carbon emission free electricity for their factories, cities, and to support them as regional exporters of power to their neighbors. Both nations are talking to France about plans to finance or build these projects.

The differences between the two sets of relationships could not be more stark. Brazil is on top having scored a significant offer of investment from French banks for its third nuclear reactor. On the other hand, Turkey is thinking France could offer support for its application to join the European Union in return for the reactor projects or at least a piece of them. Don’t hold your breath, but do expect a French press for the contract anyway.

Brazil perking along on top

Brazil has just scored a [euro]1.5 billion loan ($2 billion) from a consortium of French banks. This is good news for the Angra III project, a 1,400 MW reactor project that has stalled out several times in the past due to lack of money.

The financing is reportedly offered at an attractive rate with a 30-year payback. Total cost for the project is now said to be $5.92 billion or just over $4,200/Kw. This number is a bit higher than one might expect for the cost of a new power station in a developing nation, but it is a big reactor. Improvements to the regional electric grid may also be part of the total project cost.

Brazil has two nuclear reactors in operation. The country’s energy minister, Edison Labao, is looking at a list of 40 candidate sites from Electrobras, for two new reactors to add the first three. Construction of the new reactors could take 8-10 years once the sites are approved by the government. The two new units could be in revenue service by 2025 or earlier.

The government is favoring sites in the northeast which don’t have much by way of hydroelectric power potential. In Brazil 15% of its electricity comes from hydropower along the Amazon and its tributaries. The world wide average for hydropower is about 2% of electricity by fuel source.

Turkey’s French press brew

EU_Turkey_flagTurkey is open to bids from several nations, including South Korea, Japan, and France, for a second round of new nuclear reactors on its Black Sea coast. The bad news for France is that it has openly opposed Turkey’s application to join the European Union.This does not bode well for a favorable climate into which one would sell nuclear reactors.

Turkish Energy Minister Taner Yildiz told English language wire services out of Istanbul on Jan 24, “If we have to come to talks with France, on a new nuclear reactor, we cannot behave as if nothing has happened.”

Asked by the wire service if he expects France to modify its stance on Turkey’s bid to belong to the EU, in return for the nuclear business, Yildiz said bluntly, “It is our right to expect it.”

French President Nicolas Sarkozy, realizing he has a hot potato on his hands, is expected to visit Turkey on Feb 25. France lost out in December 2009 to South Korea on a $20 billion contract to build four new reactors for the United Arab Emirates.

The loss stung back home with some public blame shifting among French state-owned nuclear corporations. The Turkish deal is the next big opportunity for France to get back in the Middle East’s nuclear market, but is it willing to pay the political price?

Other bidders in the wings

wings2Meanwhile, having failed to come to terms with South Korea on the Black Sea site reactors, Turkey has been entertaining overtures from Japan to build them. So far only the usual exchanges of high level officials have taken place.

Last May Turkey signed a $20 billion deal with Russia to build 4.8 GWe of new reactors at a Akkuyu, a Mediterranean coastal site. The new reactor site is at Sinop on Turkey’s Black Sea coast.

According to a Dec 24, 2010, Reuters report, the Sinop site is slated to build out to 5.6GWe at a cost of $10 billion. The real cost is likely to come in at double the number reported by Reuters since even the Russians cannot deliver reactors at $1,800/Kw.

Turkey has a troubled history of offering terms for its nuclear reactor projects which have caused most commercial bidders to walk away. The Russians took the deal at Akkuyu, but only with a proviso that they can sell off at least half of their interest to Turkish investors once the reactors are in operation. It isn’t known whether the Russians will also seek the Sinop deal.

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