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RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHAK #1687/01 2661410
ZNR UUUUU ZZH
R 221410Z SEP 08
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 7521
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHUL/AMEMBASSY SEOUL 0223
RUEHIT/AMCONSUL ISTANBUL 4776
RUEUITH/ODC ANKARA TU
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 ANKARA 001687 
 
SENSITIVE 
SIPDIS 
 
DOC FOR ADDILYN CHAMS-EDDINE 
DOE FOR ROBIN COPELAND AND MICHELLE SCOTT 
 
E.O. 12958: N/A 
TAGS: EINT ENIV ENRG TU
SUBJECT: TURKEY: EMBASSY SUPPORT OF GE REQUEST FOR NUCLEAR 
TENDER DELAY 
 
REF: 07 ANKARA 2755 
 
¶1.  (SBU) Summary.  General Electric (GE) Turkey Managing 
Director Kursat Ozkan informed us September 4 that GE sent a 
formal request to GOT to postpone the deadline for bids for 
Turkey's first civilian nuclear power plant from September 
24, 2008 to March 1, 2009 due to lack of project risk 
information to make a timely bid.  On September 18, 
Ambassador Wilson sent a letter to Prime Minister Erdogan 
supporting GE,s request for a postponement in the tender. 
According to Ozkan, four of the potential six bidders asked 
for a delay but Energy Minister Guler emphatically ruled out 
any delay in a meeting with bidders on August 26 and Prime 
Minister Erdogan said September 22 that the tender would not 
be delayed.  The Energy Ministry strongly believes they will 
have bidders on September 24 and, if not, the GOT is allowed 
under the Nuclear Power law to invest in the nuclear plant 
itself, perhaps as part of a yet-to-be-structured 
public-private partnership or even via new, wholly 
state-owned company.  End summary. 
 
GE and the competition 
---------------------- 
 
¶2.  (SBU) Managing Director of General Electric (GE) Turkey 
Kursat Ozkan told us their subsidiary GE Hitachi (GEH), a 
joint venture 60% GE and 40% Hitachi, is the primary 
technology and equipment supplier for the Sabanci/Iberdrola 
consortium which had planned to bid on Turkey's first nuclear 
tender.  Sabanci will be the primary investor and Iberdrola 
will be the foreign investor and plant operator.  GEH is not 
an equity stakeholder at this point.  However, Ozkan hinted 
that at the request of consortium partners, GEH will likely 
take a small equity stake in the near future. 
 
¶3.  (SBU) Thirteen interested parties purchased the tender 
document specifications: AECL Atomic Energy (Canada), Itochu 
(Japan), Vinci Consortium (France), Suez-Tractebel 
(France-Belgium), Atomstroyexport (Russia), KEPCO (South 
Korea)-Enka Insaat (Turkey), China Nuclear Power, Unit 
Investment, RWE (Germany), Iberdrola (Spain)-Sabanci 
(Turkey), Alarko Holding (Turkey), Akenerji (Turkey) and 
Hattat Holding.  Ozkan estimates there are six to seven 
consortia that are serious contenders for the bid, and four 
of them have asked the GOT to delay the bid date.  GE 
believes two consortia are ready to bid now: KEPCO of South 
Korea, in partnership with the Turkish firm ENKA, and the 
Russian parastatal Atomstroyexport, possibly in conjunction 
with the German company RWE. 
 
GE,s concerns 
------------- 
 
¶4.  (SBU) According to Ozkan, the driving factor behind GE,s 
request for a delay in the process is the lack of key 
information needed to calculate the project's risks, which 
will affect the cost of the project, financing and insurance. 
 Since the initial announcement of the tender in March, the 
Ministry of Energy has emphasized the primacy of price.  The 
winning bidder will have the lowest cost of power generation 
per kilowatt hour.  Insurance, financing and material costs 
are very important components of the price at which the 
winning consortium can generate electricity.  Ozkan said GE 
could not turn in a competitive price with all the current 
unknowns. 
 
¶5.  (SBU) Specifically Ozkan cited the lack of a GOT legal 
regime regarding third party liability for nuclear accidents. 
(Note: Spanish Embassy commercial attach Carlos Ansede told 
us that Turkey has signed, but not ratified, the Paris 
Convention on nuclear liability, and that the Nuclear Power 
Law refers to the Paris Convention on issues of third party 
liability.  End note.)   Ozkan also bemoaned the lack of 
price escalation or indexing for construction and other 
commodities.  Since the nuclear plant will be built 5 to 7 
years in the future, material costs likely will increase.  GE 
recommended the GOT use an indexing formula, which would 
increase transparency in the cost structure. 
 
GOT sticks to the deadline 
 
ANKARA 00001687  002 OF 002 
 
 
-------------------------- 
 
¶6.  (SBU) On August 26, Minister Guler met with potential 
bidders for the nuclear project and told them the GOT would 
not delay the tender.  In a press conference following the 
meeting, Guler emphatically said Turkey is in desperate need 
of energy, so the project can not be delayed.  Energy 
Ministry Deputy Directorate General for Energy Affairs Nilgun 
Acikalin told us the GOT is not sympathetic to companies' 
requests to delay.  She argued companies have had plenty of 
time to prepare.  Acikalin quickly dismissed Embassy 
officer's suggestion that a delay could benefit the GOT by 
bringing more bidders and hence stiffer price competition and 
more technologies to chose from into the process, Acikalin 
said she was sure some companies would bid and in the worse 
case scenario (no bidders), the GOT was ready to step in to 
form a public-private partnership to get the project done. 
(Comment: as reported reftel, the nuclear power law passed in 
November 2007 provides for the GOT to form either a 
public-private company, or even a wholly public company, to 
build a nuclear power plant. End comment.)  Prime Minister 
Erdogan, in a September 22 press conference, closed the 
argument by announcing that there would be no delay in the 
September 24 bid deadline. 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
WILSON