TURKEY’s power sector is heading for denationalisation if the government gets its way. But the free-market, pro-private-sector ideas of Prime Minister Tansu Ciller are not shared by all members of the coalition and opponents are using the constitutional court to block privatisation.

The cabinet resolved last autumn to divide the state monopoly Turkish Electricity Board (TEK) into separate distribution, generation and transmission companies as a prelude to its privatisation. The future of the break-up plan, decided after a three-year study in conjunction with the World Bank, will now depend on an August court ruling. The constitutional court has already annulled earlier attempts to privatise by decree.

Cuts

For lack of a quorum in parliament before it went into summer recess on 29 July, the government must now wait until 1 September for a vote by MPs on a comprehensive law aimed at finally overcoming the opposition to privatisation.

Despite the strong opposition, economic needs are forcing the government’s hand. TEK is a leading loss-maker among state economic enterprises which, according to conditions attached to an IMF standby facility, the government is pledged to privatise.

The government’s austerity programme also pledges to cut new public works investment. The focus will be on completion of projects already under construction, according to officials. New power projects will have to be build-operate-transfer (BOT) schemes to have any chance of acceptance.

This formula had better succeed if there is to be any chance of meeting the forecast increase in demand for the next two decades. Present capacity is adequate but, without additions, load-shedding could hamper industry in the second half of the decade.

Industry is expected to be the main engine of the expansion in demand. The Energy & Natural Resources Ministry projects an increase in gross annual demand to 130.35 million million GWh by 2000 from 81 million million GWh in 1994. By 2010, demand will mushroom further to 271.45 million GWh.

The power station construction programme, as it stood before the start of the economic crisis earlier this year, called for an additional 47 thermal power stations and 100 hydroelectric plants. The government had even revived plans for two nuclear power stations, shelved after the Chernobyl disaster in 1985. MEED estimates the total cost of this additional generating capacity up to 2000 at around $16,100 million.

BOT may be an ambitious avenue to use if the aim is to build all these plants. Not one large scheme has been realised since the concept was pioneered in Turkey nearly 10 years ago. But officials are hopeful and say that a BOT law passed in June has cleared away a number of legal obstacles.

Indeed, two large BOT deals are nearing conclusion, according to bankers and contractors. The first is the 672-MW Birecik dam on the Euphrates, being negotiated by a consortium headed by Germany’s Philipp Holzmann and including the local Gama.

Final contract details are being thrashed out and syndication of the commercial financing could begin in the autumn if market conditions are suitable. The consortium’s financial adviser is Chase Manhattan Bank. A financing structure has also been put together for a 500-MW plant at Ereglisi on the Sea of Marmara, proposed by a group led by the UK-based Enron Europe (MEED 8:7:94). The group is being advised by Bankers Trust with Kidder, Peabody of the US.

Another part of the government plan for lightening its burden as a power provider is to transfer operations and maintenance into the private sector. It has announced that nine large thermal power stations will be hived- off in this way by the end of the year.

Priority has been attached to six, five of which are fuelled by lignite: Seyitomer (150 MW), Soma (990 MW), Orhaneli (210 MW), Yatagan (210 MW), and Yenikoy (1,420 MW). The sixth is a combined-cycle natural gas plant at Hamitabat in Thrace. Three other lignite stations at Catalagzi (150 MW), Kemerkoy (630 MW), and Kangal (300 MW), could follow. Several of the stations are also due to be expanded and get flue-gas desulphurisation (FGD) units to reduce pollution.

Some of the projects could yet fall foul of a government review of its investment commitments. One $500 million contract for the Cayirhan plant west of Ankara will proceed and a financing package was due to be completed in early August. Another large contract for Kangal, included in the list, will also probably go ahead, and financing for a contract for Orhaneli was concluded last year. However, the future of the expansion and FGD awards for stations at Kemerkoy and Yatagan has not yet been decided.