Turkey: New Disappointments And Debates Regarding The Nuclear Tender

The nuclear tender (the "Tender") process, officially called the "Competition to Be Launched to Determine the Company to Construct and Operate a Nuclear Power Plant and Sell Electrical Energy to TETAŞ,", is still going forward, despite the disappointment arising from submission of an offer by only one party from among the thirteen interested parties who purchased the Tender documents. The lone party was the consortium of Atomstroyexport (Russia), Inter Rao (Russia) and Park Teknik (Turkey) (the "Consortium"). As mentioned in our previous Newsletter (Fall 2008), we believe that this disappointing lack of interest should not ultimately be very surprising. The Tender documents failed to meet the expectations of prospective bidders, and certain crucial issues were not clearly established, even under the Addenda to the Tender documents. Furthermore, the Tender date was not postponed despite repeated requests.

Pursuant to the Specifications Regarding the Competition to Be Launched to Determine the Company to Construct and Operate a Nuclear Power Plant and Sell Electrical Energy to TETAŞ (the "Tender Specifications"), the offers were to consist of three envelopes that included, respectively: (1) certain corporate information and documents (mainly); (2) information regarding the criteria determined by the Turkish Atomic Energy Authority (the "TAEK"), and annexed to the Tender Specifications (the "TAEK Criteria"); and (3) the offer letter, offer form and evaluation form. Upon evaluating the first envelope submitted by the Consortium, the Tender Commission decided that the enclosed information and documents met the criteria in the Tender Specifications, and submitted the second envelope to the TAEK.

Towards the end of November 2008, TAEK officials announced that the offer submitted by the Consortium met almost all the prerequisites of the TAEK Criteria, and determined a period for the Consortium to clarify certain issues. Finally, on 19 December 2008, it was announced on the official web page of the TAEK that the offer of the Consortium had been found to satisfy the TAEK Criteria, and that a certificate in this regard had been issued in favor of the Consortium and submitted to the General Directorate of TETAŞ.

After a short break full of discussions and debates, in which the most significant concern appeared to be the risk that Turkey might become dependent on Russia for its energy resources, the third envelope of the Consortium was opened on 19 January 2009. Another disappointment followed. Considering the world-shaking economic crisis, the content of the third envelope was astonishing, featuring a discounted unit price of 21.16 US Cents/kWh, a weighted average of the total average active electrical energy unit price of 20.79 US Cents/kWh, and a total electrical energy amount of 415.5 billion kWh. It is worth noting the unit cost of electricity generated from the nuclear energy in some other countries to evaluate the unit price offered in the tender: Finland 2.76 US Cents, France 2.54 US Cents, Germany 2.86 US Cents, Switzerland 2.88US Cents, Japan 4.80US Cents, South Korea 2.34 US Cents, USA 3.01US Cents, and Canada 2.60US Cents1.

According to our understanding, the Consortium – taking into account the traumatic global developments which had so deeply affected the national economies of the Consortium partners – had its "Plan B" ready and submitted a revised offer. Initially, despite certain news reports mentioning that acceptance of the Consortium's revised financial offer was under consideration for the report to be submitted to the Council of Ministers for final approval, the revised offer was rejected and given back to the Consortium. According to recent news, TETAŞ and the Consortium has been conducting private negotiations with regard to price reductions, and the Consortium has submitted a new pricing plan that starts with 15 US Cents/kWh and decreases to 13.4 US Cents/kWh in the year 2030. Although TETAŞ has been planning to request authorization from the Council of Ministers to conduct official negotiations with the Consortium, normally, at this point in the overall process, no negotiation is foreseen under the relevant legislation and Tender documents.

Turkey is now awaiting the report to be submitted to the Council of Ministers, together with the figures to appear in it. The subsequent decision of the Council of Ministers will determine the next chapter in Turkey's nuclear adventure. Meanwhile, the Ministry has been reporting that work is underway for the second nuclear project, to be built in Sinop.


1. This information was published in the web-site of the Organisation for Economic Co-operation and Development (OECD).

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