Turkey hands nuclear plant contract to Japanese/French consortium

By bne IntelliNews May 3, 2013

bne -

Turkey announced on May 2 that it has selected a Japanese-French consortium to build the country's second nuclear power plant, in a tender competition that had come down to a straight race testing Ankara's recent declaration that its destiny lies to the east rather than west.

Energy Minister Taner Yildiz confirmed to reporters that the consortium consisting of Japan's Mitsubishi Heavy Industries Ltd and Itochu Corporation, alongside French utility group GDF Suez, has won the tender, which could be worth up to $22bn. As reports earlier this week had claimed, the deal is set to be signed on May 3 by Turkish Prime Minister Tayyip Erdogan during a visit to Ankara by his Japanese counterpart Shinzo Abe.

Yildiz said Turkey will also become a shareholder in the project to build the country's second nuclear plant with capacity of 4.5GW on the Black Sea coast. "Turkey will have a stake in the nuclear power plant that will be constructed in Sinop," he said, according to Reuters, although he did not offer details on the size of its interest. At the same time, the Japanese-French consortium will be invited to help determine a site for a third nuclear plant, and bid for that contract also.

The energy minister spoke hours after Japan's Nikkei published an interview in which Erdogan said the Japanese-French consortium had won the deal. In particular, the Turkish PM claimed, the Fukushima disaster that sealed the deal, with Turkey now having even greater faith in the technological prowess of Japan's nuclear industry. "Erdogan said Japan has experience and know-how in coping with earthquakes," the paper wrote, according to AFP. "Turkey would welcome a Japanese bid on a proposed third plant and is working to select a site," Erdogan added. "The country wants to have as many reactors as possible in operation by 2023."

Speculation has been rife through the last few weeks that, following the 2010 award of a contract for the country's first nuclear facility to Russian state agency Rosatom, Ankara was set to select the bid from the Japanese-led consortium for the next. However, Turkey rejected those claims on April 4, insisting that an offer from China Guangdong Nuclear Power Holding Co was still in the running, and setting itself up to make a choice between east and west. Yildiz had reiterated that stance 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. Bids from Canada and South Korea fell some time earlier in the process.

However, unnamed sources had tried to cast aside that attempt to keep the competition interesting, claiming - correctly - that the agreement would be signed during Abe's visit. "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 on April 29. "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 on the $20bn, 4.8GW plant 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 had boosted China's hopes of winning the Sinop contract in recent months. However, the country has limited experience in developing nuclear plants internationally. Yildiz had earlier 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 marks 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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