Turkey signs $12bn energy investment deal with UAE firm

January 04, 2013 - 5:32:05 am

ANKARA: Turkey tied up a giant agreement with the UAE yesterday for the development of coal fields in southern Turkey to generate electricity and ensure power for the fast-growing economy.

The deal to exploit the coal reserves is a new signal of the rise of the Turkish economy and of wider links between Turkey and the Middle East.

The agreement between Abu Dhabi-based Taqa and Turkey’s state-run power company EUAS marks the biggest Arab investment in the Turkish energy sector, a senior energy ministry official said. “This is a very serious investment, a significant investment,” Turkish Energy Minister Taner Yildiz said at the signing ceremony here. The Turkish energy ministry put the total cost at up to $12bn.

“This is the second-biggest investment made in Turkey after the two nuclear power plant projects,” he added. The government plans to build three nuclear power plants in hopes of preventing a possible energy shortage and reducing dependence on foreign energy supplies.

It struck a deal with Russia in 2010 to build the country’s first power plant at Akkuyu in southern Turkey and is in negotiations with China, Japan, South Korea and Canada to build the second nuclear reactor in Black Sea region.

With the latest agreement, the coal reserves at Afsin-Elbistan basin in southern Turkey will be put to use for electricity production. Over the last decade, Turkey’s Islamic-rooted Justice and Development Party (AKP) government has boasted of major success in transforming the economy after a devastating meltdown in 2001 and has introduced strict budgetary discipline under IMF programmes.

The country achieved record growth rates exceeding 8.0 percent in 2010 and 2011. Turkey has also cultivated good relations with the Arab world and gained access to Middle Eastern investors and markets.

“The Turkish economy has been doing very well over the years ... because you have a good investment climate. If you have a good investment climate, we’ll come and invest,” UAE Energy Minister Mohammad bin Dhaen Al Hamli said in remarks about Turkey. He hailed the multi-billion-dollar joint venture with Turkey as “strategic” and as a sign of an ever-growing trade relationship.

In 2012, the trade between Turkey and UAE amounted to $9bn-$10bn, the minister noted. “We can only see that we’ll increase our investment in Turkey and hope that we succeed.”

Taqa and Turkey’s EUAS have been selected as the government-related entities responsible for implementing the project. 

“This agreement gives our company an exclusive right to negotiate with the Turkish government on this project for the next six months,” said an official from Taqa.

The negotiations will lead to the signing of a “host government agreement” in the second quarter of 2013, establishing more detailed terms, he added. Under the intergovernmental agreement, the project partners will modernise and expand the existing 1,400 MW Plant B and develop several new power plants and associated mines in sectors C, D, E and G of the Afsin-Elbistan region.

And preparatory work on Plant B and the feasibility study for the planned 1,440 MW Plant C and associated mine development will start immediately.  The Afsin-Elbistan basin where two thermic power plants are already in operation has the potential to power new plants with a total installed capacity of 8,200 megawatts. 

The region contains 4.4 billion tonnes of coal reserves, which account for approximately 40 percent of Turkey’s lignite resources.

With the joint venture, Turkey is hoping to cut nearly $1.2bn worth of natural gas imports, which account for a large part of the country’s current account deficit.