Turkey Receives Russian Help To Build Massive Nuclear Plant That Will Be Operational By 2023

Turkey’s elusive quest for harnessing nuclear energy dates back to times which most of us perceive only through the black-and-white footage of 1950s and stories of our parents and grandparents. Launched by President Eisenhower’s Atoms for Peace program, it took off steadily as by 1956 Turkey already boasted a reactor research facility not far away from Istanbul, on the shores of lake Küçükçekmece. By the 1970s the Turkish authorities have pinpointed the most suitable site for the construction of a nuclear plant – they have chosen Akkuyu on the Anatolian coast, making use of its proximity to the sea, low population density and at the same time closeness to big demand hubs, as well as its low seismic activity.

What the Turkish planners envisaged some 50 years ago is progressively being realized with the Rosatom-led Akkuyu project. In many ways, the Akkuyu project is a novelty – it is Rosatom’s first project constructed at a build-own-operate (BOO) parity and its first-ever real endeavor in the Levant. Yet when the Chernobyl-entailed mass hysteria slowly started to fade in the late 1990s, Russia was nowhere to be seen in the list of interested parties – at that time it seemed that either Westinghouse of Framatome (the predecessor of Areva) would get it. However, by the time the Turkish government issued a tender for the construction of Akkuyu, only Rosatom filed an official bid to build four 1200MW pressurized water reactors, supported by a commitment to dispose of all the plant’s used nuclear fuel.

From there on, things took a swift turn – an intergovernmental agreement was signed in 2010, the legislative basis for the construction was erected (as Turkey had previously no comprehensive set of laws for nuclear energy), a limited construction resolution was issued in 2016 to be followed two years later by the official start of construction works. The plan is to commission the nuclear plant in 2023 when the Turkish Republic celebrates its centenary. Interestingly, the nuclear project went forward despite significant turbulences in the Russo-Turkish relations, such as the 2015 shooting down of a Russian fighter jet over (allegedly) Syrian territory. Tariff negotiations were successful, too – the sides fixed the electricity tariff at 0.1235 USD/KWh for the first 15 years of operation with the option to increase it to 0.1533 USD/KWh should there be any payback issues.

Roughly around the same time as Ankara committed to the Akkuyu Nuclear Plant, it had also kick-started the quest to build another nuclear plant, this time on the Black Sea coast of the country, in Sinop. Somewhat differently to Akkuyu, the government went for a build-operate-transfer (BOT) scheme with Sinop, signing a contract with Atmea, the Franco-Japanese consortium comprising Mitsubishi Heavy Industries and Areva, in 2013. It was estimated that construction works on the four Generation III pressurized water reactors would start in 2017, costing approximately 18 billion USD. According to a preliminary agreement, Atmea would own 51 percent of the Sinop nuclear plant, Turkish state utilities company EUAS would take 49 percent and Engie would operate it. On paper, everything seemed fine, yet ended in an all-around fiasco.

The root cause of its cancellation, officially announced in December 2018, was cost inflation. The 18 billion USD cost estimate spiraled up to 44 billion USD due to the necessity to implement stricter post-Fukushima safety standards – despite regular insistences by Ankara to keep the cost level at its initial level. The deal breakoff led to a nightmarish result for Japanese nuclear companies – after the retraction of a nuclear project in Taiwan (2014) and Vietnam (2016), followed by the calling off of Sinop and Anglesey in Wales (this January), Japan has currently no active nuclear plant construction abroad, pretty much leaving the global nuclear market to the Russians and Chinese.

What is the difference between the two projects that made Akkuyu feasible and has rendered Sinop unattainable? Most importantly, in case of the former, the entirety of financial risks arising from any appreciation of the project lies entirely on Rosatom, a state company whose former CEO is now First Deputy Chief of Staff of the Russian Presidential Administration. Even an appreciation of 5-6 billion USD (initially Akkuyu was estimated to cost 15.8 billion USD, its current price tag hovers around 22 billion USD) is tolerable under such circumstances. Not only did Sinop depend on the cooperation of the French and Japanese, it also presupposed Turkish financial involvement in the project. Secondly, whilst Akkuyu remained quite high on the agenda of Turkey-Russia political summits, Sinop did not receive the same kind of political backing.

A good example of why political backing matters is the ownership structure of Akkuyu. Similarly as with Sinop, it was by no means easy finding Turkish counterparts for the project. It was expected that Turkey would be represented by a consortium consisting of three private companies, mostly known for their dealings in the construction business – Cengiz Holding, Kolin Insaat and Kalyon Insaat. Yet when all three companies quit the project in February 2018 (i.e. 2 months before the start of construction), Akkuyu did not ground to a halt. Instead, negotiations were initiated between the Turkish state-owned electric power holding EUAS to buy into the project, potentially even aiming for a 49 percent stake. It would be quite incredible if this was not the result of a political agreement in the background.

The Sinop nuclear plant setback did not stop Turkey from dreaming big. Akkuyu would supply “only” 10 percent of the nation’s energy demand, indicating more is needed to rid Turkey of its environment-polluting coal dependence. Last year President Erdo?an announced Turkey would build a third nuclear plant – the location is rumoured to be the Thrace region northwest of Istanbul, close to the Bulgarian border. Even though there is still no clarity on who would lead the project, however, Energy Minister Fatih Donmez hinted that Ankara would cooperate with China on the project. (source, source)