David O’Byrne in Istanbul -

As the saying goes regarding any contract, "the devil is in the detail". In the case of Turkey's newly signed nuclear agreement with Japan, the problem so far is the lack of detail.

To begin with, contrary to the majority of media reports what was actually signed was not a "$22bn deal for the construction of Turkey's second nuclear plant".

Rather, as was confirmed by Japanese Prime Minister Shenzo Abe in a sole press conference, it was an inter-governmental agreement between Turkey and Japan allowing for exclusive negotiations with a Japanese-led consortium for the development of the Sinop plant. In effect, little more than talks agreed previously first with South Korea, and later with Japan both of which foundered. The former over Turkey's refusal to grant the project treasury guarantees and the latter after Japanese operator Tepco felt unable to continue in the wake of the Fukushima disaster.

What further details have emerged regarding the current talks have come mainly from Turkey's energy ministry. Officials have confirmed that the talks are being conducted with four companies: Japanese companies Mitsubishi and Itocha, and French companies Areva and GDF-Suez - who are expected to operate the Sinop plant.

Together the four will take in the project a maximum 51% stake, with each company's share subject to negotiation between them, while the remaining 49% will be given either in total to Turkey's state generator EUAS, or with EUAS taking 25-30% and the remainder going either as a block to another Turkish company, or to be sold by IPO.

In addition, the two sides have confirmed that the plant will consist of four units of the Mitsubishi-Areva designed Aretema-1 reactor totalling 4.48 gigawatts (GW), and that a sales agreement was reached guaranteeing purchase of the plant's output for 20 years at 11.8 US cents per kilowatt hour (KWh) or 10.8c/KWh if Turkey provides uranium fuel for the plant.

Of the four companies named to date, only GDF-Suez has commented, confirming its interest in being plant operator depends on a site feasibility study, and as a developer on full due diligence of the project. Hardly an unequivocal expression of intent, not to say one which fails to answer doubts over the project's viability.

Feasible?

It seems safe to assume that Turkey is hoping that the purchase guarantee together with the 49% local stake will be enough to reassure investors in lieu of treasury guarantees. But will it?

It's only two years since GDF-Suez offered to submit its own bid for development of the plant. That bid was rebuffed by a Turkish government incensed by France's legislating to criminalize denial that killing of Ottoman Armenians during World War I was genocide and vocal opposition of France's then president Nicolas Sarkozy to Turkey's EU bid.

France may now have a new president and relations returned to normality, but his control of the French legislature is far from assured, and his term will end in 2017, three year's before the plant's first unit is expected to be commissioned. What will happen if France adopts more legislation that Turkey objects to is unclear, as is Ankara's possible response to another French President opposed to Turkey's EU accession - an important consideration given that the plant will be operating for 40 years after the guarantees end.

Both, though, will need to be considered by GDF-Suez and its potential partners before committing themselves to the project and Ankara also, given that without an operator the project will again founder.

All this before both sides even consider the mooted partnership with EUAS and an unknown Turkish company, or how to run an IPO in a project for nuclear power plant given the post-Fukushima doubts over the future of the nuclear industry.

Almost the only aspect of the project not in doubt is that Turkey's power demand is expected to double over the next decade and to continue growing beyond that.

Clearly the Sinop plant will not be meeting demand that soon, although it will eventually be contributing to reducing Turkey's current account deficit, a large part of which is down to over-reliance on generating power from imported gas - primarily expensive gas from Russia and Iran.

But uranium fuel too has a cost and future supplies are neither secure nor their price guaranteed, while Turkey is surrounded by countries with gas which will become available over the next decade or so.

Israel has already signaled its interest in constructing a pipeline to export its gas to Turkey and on to Europe, a project which may yet convince Cyprus to shelve decades of enmity in favour of a guaranteed return on its own gas. Most likely to reach Turkey though is gas from Iraq, especially the Kurdish controlled north which has abundant supplies, an urgent need to monetize and no other route for export.

A pipeline to Turkey would be cheap to build and could be constructed in months. And depending on the sale price, the gas could serve to make Turkey's nuclear programme look like its older gas deals with Russia and Iran - an expensive mistake, which future generations have to pay for.