17 April 2014, Thursday
Today's Zaman

Russian builder submits overpriced bid for nuclear plant

20 January 2009, Tuesday /DAVID NEYLAN
After months of speculation, the Turkish Electricity Trading and Contracting Company (TETAŞ) opened the third and final envelope in the controversial tender process to build a power plant in Turkey.

The only company bidding, the Russian-Turkish JSC Atomstroyexport-JSC Inter Rao Ues-Park Teknik joint venture, offered a price of 21.16 cents per kilowatt-hour (kWh). Current electricity prices in the country vary between 4 cents and 14 cents per kWh.

The price offer came as a disappointment to many as the cost of electricity generated was reported as being nearly four times higher than the current price of electricity. 

Immediately after the envelope was opened, the company announced that they had submitted another envelope with a price revision that better reflected current market prices. As Today’s Zaman went to press, the second price offer had yet to be released.

The submission of the envelope with the 21.16 cents per kWh was made on Sept. 24 -- a time when the cost of electricity was higher.

As per the agreement, the tender to operate the nuclear plant is for 15 years and is estimated to generate a total output of 415 million kWh of electricity. The estimated revenue generated by the plant at the above price will be $86.367 billion, or about $5.76 billion per year.

In a news conference shortly after the envelope was opened, Turkish Minister of Energy Hilmi Güler dodged reporters’ questions about the seemingly excessive price. “I don’t want to comment on this because only the commission is authorized to comment on the price. … The company has sent us a revised letter considering the latest price change in the international market.”

He added that the second letter had been addressed not to the ministry bur rather to TETAŞ and therefore was reluctant to respond to questions. Güler added that the new price offer had yet to be opened and that there were no obstacles in the way to propose new prices. The Anatolia news agency reported that he refused to comment on what he thought would be a more reasonable price offer.

Speaking by phone with Today’s Zaman, Professor Ahmet Bayülken, general manager of İstanbul Technical University’s nuclear reactor, described the prices as “really too high for me” and noted that theoretically electricity prices should be in the range of 5-7 cents per kWh, but given Turkey’s market conditions, prices could conceivably be in the ballpark of 9-10 cents per kWh -- “but not higher,” he added.

When asked if he was hopeful about the yet-to-be announced price revision Güler referred to, Bayülken replied that he didn’t “expect the decrease to be anywhere near 100 percent,” which would bring it closer to the market price.

The unfortunate fact, according to Bayülken, was that the offer couldn’t be compared with other price offers as there was only one bid. 

Thirteen bidders bought bidding rights, but only one was able to make offers. The 13 included AECL Atomic Energy Of Canada Limited (Canada), Suez Tractebel (France-Belgium), Unit Investment N.V. (the Netherlands), Hattat Holding-Hema Consortium (Turkey) and Ak Enerji (Turkey).

The apparent haste in the government’s desire to undertake the bidding resulted in 12 of the bidders being unable to prepare the necessary documentation to take part in the second step of the tender. The second tender required the detailed specifications the bid’s technical aspects.

Their requests to the government for an extension of the tender process in order to have the required time to put together a suitable offer was reported to have fallen on deaf ears.

In addition to protests from environmentalist groups, the construction of another nuclear power plant in Turkey has proven controversial for a number of reasons.

One source of criticism has been the source of the electricity itself. Seeing as one of the strongest arguments for building nuclear power stations was to reduce the dependency on Russian gas supplies for electricity, many point to the irony in that the source of the power itself will be a Russian company. The fact that the technology used will make the power plant dependent on Russian-built uranium centrifuges has been highlighted as an additional source of concern.

Approximately 35 percent of Turkish electricity is produced from gas purchased from Russia. It is expected that the nuclear reactor would produce an additional 20 percent of Turkey’s electricity outputs.

Even the timing of the bidding process has been criticized as it began in September -- a time when companies were increasingly less willing to take on large long-term financing projects. Some pundits said Turkey was lucky to have even received one bid considering the volatile market and criticized the government’s haste in initiating the tender process given the tough economic times.

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