Government pulls the plug on contracts -- Turkey market dies

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The economic crisis in Turkey and government aversion to renewable energies have more or less sunk any hopes of getting 16 new wind projects on-line by the end of 2002, as wind developers were predicting a year ago. "Not a single turbine went on-line in Turkey in 2001 and no projects are likely to go ahead in 2002," says a disappointed Mehmet Hanagasioglu of Swiss development company Interwind in Zurich. Turkish wind capacity stands at just 19.2 MW.

At the start of 2001, 17 wind stations were among 29 Build Operate Transfer (BOT) energy projects granted treasury guarantees in 2000. The projects were to have been built and operated by private developers before transfer to the state. One of these, a 10 MW wind project, went on-line already in 2000, but the rest are nowhere to be seen. What went wrong?

The Turkish state has massive debts and the government sees the treasury guarantees as a liability, suspects Hanagasioglu. "The government has reneged on signed agreements. And regrettably, this experience with my own country has taught me what country risk is," says Hanagasioglu. "Seven of the projects had signed contracts and agreed implementation with the ministry and everything was in place. All these are back to square one, negotiating again with the government. So much time and money has been wasted through the delays." Interwind has been trying to get its Canakkale project underway since 1996.

The government is not allowing prospective wind developers to take it to court over previously valid contracts -- and has even deleted clauses in the contracts which allowed for international arbitration should disagreements arise. Even if a developer gets a project up and running, it risks paying a penalty equal to the entire company capital and cancellation of the power purchase contract if the wind plant does not produce as expected. Furthermore, any contract will be invalid if the whole wind station is not approved by the authorities and commissioned by the end of 2002. "What the ministry has come up with for the wind projects is simply not do-able. It's no-go, it can't be financed," says Hanagasioglu.

A second prospective developer, Demirer Holding, has four projects with signed contracts. "Like all the others we are waiting for the treasury guarantees to be issued as these are crucial for making the financing easier," says the company's Salih Uysal. Demirer, based in Istanbul, has already agreed a 20 year contract with the state wholesale electricity purchaser, Tettac, for sale of its wind generation at $0.053-0.054/kWh.

Higher gas prices

Metin Atamer, Interwind's local Turkish partner, is incensed by accusations of greedy wind developers. He says that new gas fired power plant, amounting to nearly 30% of Turkey's power station capacity, have contracts with power purchase prices that average $0.0675/kWh.

Quite apart from the 17 projects at an advanced stage of development, another 390 MW of wind projects were selected from a government tender in May 2001. All have been cancelled by the energy ministry, Atamer says.

"Despite Turkey's vast wind resource, we can only conclude that the concept of wind energy in Turkey has finished its life for the time being," says Atamer. This looks like bad news for development companies, like Germany's Ostwind, P&T Technology, RePower Systems and Umweltkontor, which have set up subsidiaries or divisions in the country.

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