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DE RUEHAK #1724/01 2701615
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FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 7585
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIT/AMCONSUL ISTANBUL 4803
RUEUITH/ODC ANKARA TU
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 001724 
 
SIPDIS 
 
E.O. 12958: DECL: 09/25/2018 
TAGS: ENIV ENRG RS TU
SUBJECT: RUSSIANS ARE THE SOLE BIDDER ON TURKEY'S NUCLEAR 
TENDER 
 
REF: A. ANKARA 1687 
     ¶B. 07 ANKARA 2755 
 
Classified By: Economic Counselor Dale Eppler for reasons 1.4 (B) and ( 
D) 
 
¶1.  (C) Summary.  Ignoring delay requests from a majority of 
potential bidders, the GOT stuck to the September 24 bid 
submission deadline for the nuclear power tender and received 
only one bid, from AtomStroyExport of Russia.  The bid will 
be subjected to an approval process, but GOT officials 
seem resigned to its ultimate acceptance.  There were many 
signs that many bidders were not happy with the rushed GOT 
tender process and would not participate, so it is difficult 
to understand why the GOT pressed forward.  Rationales range 
from political interests, to an overestimation of bidders' 
real interest.  The GOT strategic aim for building nuclear 
power was to increase energy independence, but if the Russian 
bid is accepted, the opposite will happen -- Turkey's 
dependence on Russian fuel for electricity will increase from 
35% to 55%.  End summary. 
 
¶2.  (C) On September 24, the GOT received six envelopes from 
consortia who had bought tender specification documents in 
March 2008.  Five envelopes contained "thank you" letters 
while one contained a real bid from the Russian parastatal 
company Atomstroyexport with its Turkish Partner, Park Group. 
 
 
Why No Delay? 
------------- 
 
¶3.  (C) Following the announcements of the results, Energy 
Ministry Undersecretary Selahattin Cimen told us that if he 
had to do it over, he would urge the government to give more 
time to prospective bidders to prepare offers.  It is 
difficult to understand why the GOT did not delay the tender 
when there were clear signs that few companies would bid. 
Prospective bidders met with Energy Minister Guler on August 
26 and requested a delay in the bid submission deadline. 
Reasons for the delay ranged from difficulty pulling together 
financing to lack of clarity on third party liability. 
Following the meeting, Guler told the press he opposed any 
delay.  On September 18, Ambassador wrote to the PM to 
request a delay on behalf of U.S. company General Electric 
because its bid was not ready (ref a).  On September 22, PM 
Erdogan also publicly ruled out a delay, even though at that 
point, the Energy Ministry expected at most three bids, from 
the Chinese, Russians and South Koreans. 
 
¶4. (C) GE General Manager for Turkey Kursat Ozkan, told us 
that a delay would have been very difficult politically 
because the GOT has said publicly many times Turkey needs 
more electricity now.  Many analysts predict electricity 
shortages for 2009.  Energy Ministry Deputy Director General 
for Energy Affairs Nilgun Acikalin told us a six month delay 
would not have guaranteed the resolution of some barriers to 
bids, such as Turkey's accession to the Paris Convention 
(which would have clarified liability issues) and the 
worldwide credit crunch that made private sector financing 
difficult.  A third explanation is that the GOT expected more 
bids than came in.  According to Referans columnist Erdal 
Saglam, Minister Guler was informed on September 22 French 
company Areva lacked financing and would not submit a bid. 
The Minister's informal advisor Faruk Demir told us the 
Minister asked his staff's opinion on September 23 about who 
would bid.  Prevailing wisdom, which TAEK Chairman Okay 
Cakiroglu shared with us separately on September 19, was 
there would be three bids: Russian, Chinese and South Koreans. 
 
Approval Process for the Bid 
----------------------------- 
 
¶5.  (SBU) The Russian bid will go through a two-step approval 
process.  First, the Turkish Atomic Energy Agency (TAEK) will 
have 15 days to decided whether the bid meets the technical 
qualifications outlined in TAEK's criteria 
(www.taek.gov.tr/olcutler/criteria1 1.html).  (Note: The week 
of September 29 is a holiday in Turkey and the government 
will be closed, so this process will likely begin Oct 6.) 
Assuming the bid meets the TAEK criteria, the final offer 
will be submitted to the Cabinet of Ministers for approval. 
According to the nuclear law (ref b), the basis for the 
Cabinet's decision will be the price per kilowatt hour.  If 
the bid is rejected, the process will begin anew.  Cimen told 
 
ANKARA 00001724  002 OF 002 
 
 
us a new law would be required for a new tender process. 
According to Acikalin, this new law would likely also spell 
out the terms and conditions for a public-private partnership 
for nuclear power development. 
 
Will the Russians win? 
---------------------- 
 
¶6.  (C) This is difficult to predict.  According to Cimen, 
the Russian bid will most likely meet TAEK's criteria.  That 
leaves price as the only apparent basis for refusal. 
According to Saglam, the GOT is expecting a bid around 8 to 9 
Euro cents per kWh.  If the bid is drastically higher, this, 
it could be a reason to cancel the tender.  However, 
canceling the tender will not be easy.  Cimen said only the 
Cabinet of Ministers could make such a political decision. 
MFA Energy Department Head Berris Ekinci said this is a 
delicate situation and that a cancellation would have to be 
considered within the context of overall Russia-Turkey 
relations.  (Note: Russia is Turkey's largest single trading 
partner.)  Saglam was more blunt saying the GOT would not 
dare cause a diplomatic issue with Russia over the tender. 
Demir said Erdogan talked to Putin about Turkey's nuclear 
tender during his August 14 trip to Russia and he suspects 
Erdogan will look favorably on the bid.  The Russians, 
partner, Turkish company Park Group (part of Ciner Holding), 
may also have some political connections with the GOT.  Demir 
claimed several of Guler's staff had connections with the 
company and Saglam said Ciner had originally been supporting 
the Chinese bid but joined the Russian consortium at the 11th 
hour when it decided not to bid. 
 
If so, Turkey's Dependence on Russia Will Increase 
--------------------------------------------- ----- 
 
¶7.  (SBU) The GOT's strategic aim in establishing civilian 
nuclear power was energy independence.  However, a winning 
bid by Russia would increase Turkey's dependence on Russia, 
the very country on which it already depends the most.  Using 
Russian resources (natural gas, coal and fuel oil), Turkey 
generates 35% of its total electricity.  Last year, Turkey 
generated 191 billion kWh of electricity.  The nuclear power 
plant would add approximately 40 billion kWh (or 20%) to 
Turkey's generating capacity.  Taken together with other 
Russian fueled generation, Russian nuclear power in Turkey 
would leave Turkey 55% dependent on Russia for power 
generation. 
 
No-thanks letters 
------------------ 
 
¶8.  (U) The companies that submitted letters of thanks but 
declined to bid were Atomic energy of Canada Limited 
(Canada), Suez-Tractebel (France-Belgium), Unit Investment 
N.V. (Netherlands). Hattat Holding (Turkey) and AkEnerji 
(Turkey).  U.S. firm General Electric with Iberdrola (Spain) 
and local partner Sabanci had bought tender specifications 
but declined to bid. 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
WILSON