Turkey set to choose between east and west on nuclear tender

By bne IntelliNews April 30, 2013

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Turkey will announce the winner of the tender to build its second nuclear power plant by May 5, the energy minister said on April 29. Now pitched by Ankara as a straight race between east and west, the decision offers the government another opportunity to illustrate which way it sees the country's future.

Speculation has been rife that, following the 2010 award of a contract for the country's first facility to Russian state agency Rosatom, Ankara is set to select a bid from a consortium including Japan's Mitsubishi Heavy Industries Ltd, Itochu Corp and France's GDF Suez to build the next. The project is expected to cost around $22bn. However, Turkey rejected those claims on April 4, insisting that an offer from China Guangdong Nuclear Power Holding Co is still in the running.

Energy Minister Taner Yildiz reiterated that when he spoke to reporters on April 29. "We are about to finalise the agreement for construction of the second power plant. China and Japan are the front runners," he said, according to Reuters. Bids from Canada and South Korea are clearly now dead.

While Yildiz said the announcement is due at the weekend, the media cites an unnamed source saying that an agreement on construction of the 4.5GW plant at Sinop, on the Black Sea coast, will be signed during Japanese Prime Minister Shinzo Abe's visit to Turkey, when he will meet counterpart Tayyip Erdogan. "The Japanese bid has the advantage, but there are still one or two issues that we need to work on together," energy ministry sources told Hurriyet Daily News. "We believe that we will find a common way when Shinzo Abe comes to Turkey."

Energy-hungry Turkey is pushing hard to expand its capacity to keep pace with economic growth. However, it also needs to reduce its heavy reliance on gas-fired power plants due to ongoing struggles to secure supplies, in particular to replace Iranian flows. Turkey's second largest supplier of oil and gas is under international sanctions, exposing Ankara to pressure from the US and EU.

Therefore, on top of a recent turn to brown coal, Turkey is planning to build three nuclear power plants. Ankara struck a deal with Russia in 2010 to build the country's first power plant at Akkuyu in southern Turkey. Rosatom is set to start construction in mid-2015, and expects electricity production to start in 2019, a Russian official said in February. Rosatom will assume all financial costs on the project in return for guaranteed energy prices.

Readiness for a similar project profile has set China up as a favourite for the second plant in recent months, but the country has limited experience in developing nuclear plants internationally. Yildiz said Turkey wanted to build a nuclear power plant that could resist a magnitude nine earthquake. Turkey, like Japan, is in a fault zone.

Meanwhile, the selection of the Mitsubishi-Areva consortium would mark an improvement in Turkish-French ties, which have been strained in recent years. That has hit French businesses operating in Turkey, particularly in obtaining big state contracts, but a detente was signalled by a decision in Paris earlier this year to drop its objections to certain EU chapters under negotiation with Ankara.

At the same time, Ankara has also been signalling its frustration with the West recently, as it sees its 2005 bid to join the EU continue to stall. On April 26, it became the first Nato nation to sign up as a partner with the Shanghai Cooperation Organisation (SCO), the Asian security bloc dominated by China and Russia. It accompanied the news by declaring that Turkey's future lies in Asia - clearly meaning those twin emerging giants, rather than Japan.

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