Rehabilitation of Afsin-Elbistan- A Thermal Power Plant

The meeting to be held between EUAS and the World Bank postponed to 28 April 2008. Latest status of the tender will be reviewed and the course to be followed for construction of the project will be examined. Letter from Hitachi group will be considered as well

The General Directorate of EUAS (Electricity Generation Corp.) which, after a preparatory period of 3 years, could not collect any bids for its Afsin-Elbistan A Thermal Power Plant Rehabilitation Project for which international feasibility studies were carried out as the most important project that will boost power generation in the public sector on the basis of local resources in anticipation of the power crisis which is highly likely to be experienced in Turkey in the year 2010 and for which credit financing was created by the World Bank after being approved from the standpoint of its being an exemplary project in the privatization of power plants, has re-focused its activities to determine the course it will follow henceforth under its project.

It is reported that the General Directorate of EUAS will first negotiate with the World Bank that extended EUR 280 million credit for the project, and obtain the opinion of the Bank in order to determine the steps it will take from now on for its turn-key international tender for Afsin-Elbistan A Thermal Power Plant Rehabilitation Project for which no price offers could be collected by 15 April 2008.To this end, it was reportedly decided first to hold a meeting on 24 April 2008, postponing it later on to 28 April 2008, Monday.

As might be recalled, Japanese Hitachi Group had submitted, instead of a bid, a letter stating that it is closely interested in the tender and requesting that a meeting be held for Afşin-Elbistan A Thermal Power Plant Rehabilitation tender for which price offers were requested by 15 April 2008

Latest status of the tender will be considered at the meeting to be held with the World Bank

Sources state that the General Directorate of EUAS will, prior to applying to the Board of Directors for the course to be followed under the project, examine the latest status of the tender with the World Bank at the meeting where the opinion of the Bank will be obtained as well.

As is known, EUR 280 million credit agreement signed with the World Bank in 2007 foresaw that the rehabilitation operation would be realized according to the international tender procedures of the World Bank, as approved under related feasibility studies. In fact, action has so far been taken by obtaining the approvals of the Bank at such important stages as bid invitation, bid evaluation under the tender issued according to international criteria.

When reviewing the latest status of the tender, the letter from Hitachi group will be considered as well, and Hitachi group’s proposals concerning the performance guarantees may be discussed at this point, sources say.

Sources state that the General Directorate of EUAS expected Hitachi Group to submit a bid, that submission of a letter instead of a bid is an unexpected development for a potential customer, that for this reason, the General Directorate of is not warm towards the letter of Hitachi Group, and stress that Hitachi Group could not exploit an important chance.

As is known, the General Directorate of EUAS can hold “Package System” tenders as well, besides the international turn-key tenders. EUAS can invite bids for each of the main items of big projects in the form of a separate package, thus collecting “Package System” bids, and can commission the plant concerned without any problems by monitoring the project coordination rigorously and by ensuring harmonization among the activities concerned. Signing contracts with specialized contractors as well, the General Directorate of EUAS is known to prefer turn-key contracts over the contracts made with specialized contractors in order to be able to commission the plant concerned with less problems.

On the other hand, the meeting to be held with the World Bank will consider the issue of the new price increases being taken into account in the realization of the project and whether there will be an increase in the total investment cost in such a case.

As is known, the Undersecretariat of the State Planning Organization (SPO) is extremely sensitive towards the total investment cost, emphasizing that there are certain investment limits in order for the rehabilitation investment to be feasible. It is reminded that, if the total investment cost is to be increased, it will be subject to the favorable opinion of SPO and to the approval of the Supreme Planning Council.

The project was foreseen to be completed in 2009 from the standpoint of security of electricity supply

Afsin-Elbistan A Thermal Power Plant Rehabilitation Project had been selected, from the standpoint of the World Bank as well, as the rehabilitation project with the highest efficiency for the Generation Privatization applications to be launched in the coming period.

Included in the public investment program in the year 2006, Afşin-Elbistan A Thermal Power Plant Rehabilitation Project is Turkey’s most important investment to be commissioned from the standpoint of the security of electricity supply in the year 2010. Foreseen to be completed by the year 2009, the project has already been delayed for about 1 year, and, due to this development under the tender, the course to be followed will be determined urgently in order not to lose more time for construction of the project, sources say.