Tuesday, February 8, 2011

Turkey trots out Toshiba to try for Sinop

Negotiations with South Korea failed to produce a deal

turkey nuclearThe Financial Times reports that Toshiba is “confident” it will seal a deal to build a 5.4 GWe nuclear energy power station on a Black Sea coastal site near Sinop. According to the FT, Norio Sasaki, Toshiba’s president, told the newspaper terms and conditions that remain to be negotiated include long-term risk insurance. Toshiba will supply its 1300 MW ABWR reactor design and not the Westinghouse AP1000.

This is the second nuclear deal for Turkey. In 2010 the Russian state-owned firm Atomstroyexport inked a deal for a 4.8 GWe nuclear power station at a Mediterranean costal site near Akkuyu. The Russians were the only bidder after several international consortiums pulled out in disputes with Turkey over intellectual property protection and the lack of government guarantees for power purchases for the first 15 years of plant operations. Westinghouse did not participate in any of the bid teams.

Japan’s likely success in closing the Sinop deal with be that the Japanese Export Bank will supply long-term credits to Toshiba for the cost of construction if it wins the business from Turkey.

No deal likely for South Korea

The Financial Times reported last November that South Korea was unable to close a deal with Turkey to build new reactors at the Sinop site. The main sticking point was said to be electricity prices for power from the plant. Other issue included the amount of financing South Korea would provide to build the plant and risks associated with the possibility of cost-overruns.

Credit risk The risk for South Korea, is that in addition to building the plant, Turkey may also be asking the consortium to operate it. This is the deal Turkey has with Atomstroyexport. Like the Russians, South Korea may be asking that after 15 years it be allowed to sell off the reactor to Turkish investors.

South Korea pursued the Turkish deal on the momentum of its groundbreaking $20 billion deal, inked in December 2009, to build four 1400 MW reactors for the United Arab Emirates (UAE). In the UAE deal South Korea is providing some of the financing, but less than 50% as other investors are being offered opportunities to purchase bonds that will finance the power stations.

French state-owned nuclear firms are also said to be interested in bidding on the Sinop deal. However, Turkish government officials made it clear in statements to the news media, ahead of a visit by French President Nicolas Sarkozy, that he needed to moderate his opposition to Turkey’s entry into the European Union. Otherwise, there would be no nuclear deals.

Turkey’s nuclear ambitions

The Russians reportedly will offer electricity from their power station at Akkuyu about $0.12/kWhr. Electricity from natural gas plants in Turkey is currently offered to rate payers at $0.08/kWhr. However, five-or-ten years from now, when all four 1200 MW reactors are in revenue service, the price of $0.12/kWhr may look very good.

Also, Turkey has ambitions to become a regional exporter of electricity to its neighbors. Turkey’s energy ministry reconfirmed this ambition in a statement to Platts on Feb 2. Energy Minister Taner Yildiz is reported to have said the country wants to build a total of 20 reactors by 2030. The first eight would include four each at the two coastal sites. Three additional sites are expected to be selected, but their names have not yet been released by the energy ministry.

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