Thursday, February 11, 2010

Amasra new thermal power plant investment

Dear Energy Professional, Dear Colleagues,

An international energy/ power investor company (IPR.LN)is partner of 480 Mwe combined cycle power plant on Tekirdag sea coast in Thrace part of Turkey for last 10 years. The Company advanced the most in two weeks in London trading after the Independent newspaper reported GDF Suez SA is considering raising its bid to purchase for the utility.

The Foreign Company is now considering partnering with another local investment group to build a new local bituminous coal firing thermal power plant in Amasra county, BARTIN Province of Turkey to generate 1200 MWe (or 2640 MWe) electricity output for the national grid. The new TPP investment project may be considered to increase the investment portfolio in order to have price raise in negotiation with GDF Suez SA.

The local partner investor group has received 49-years of coal production concession right. Both parties are now negotiating on the final MoU draft, and hoping to sign the MoU document in next few weeks time.

Earlier the local investment group has prepared an Environmental Impact Assessment (EIA) report to get permission from the Ministry of Environment, which is needed to get power plant investment licensing from the energy markets regulatory board.

Earlier the investment capacity was presumed to be 2640 Mwe comprising 4x 660 MWe units, firing approximately total 1000 tons of coal per hour, where the local coal has 3500 local/kg LHV as received, 5800 kcal/kg LHV after water washing enrichment.

Your writer had spent a few nights to read the preliminary so-called EIA report, in the end he was displeased with the technical quality of the report, other than flora and fauna and all unnecessary details, concluded that the report was not so professional, very simple, even somewhat misleading, even quite far from truth in certain chapters.

Our calculation relieves 1300 tons per hour coal with 5800 kcal/kg LHV after water washing enrichment of as received bituminous. With 7000 hours of estimated annual operation, the plant should consume 7 million tons of enriched coal or 10 million tons per year as received.

Overall local bituminous coal production was 1.2 million per year in year 2008, which is corrected to 2 million tons in year 2009. Therefore the plant will consume 5 times of the current production of the local coal reserves. How will this happen? Isn't it misleading?

Now the new foreign company is in the picture with the local investor with half the earlier output generation not 2640 MWe but for 1200 MWe, in 2 units of 600 each.

We understand that the foreign investor company has 3 similar coal firing references in the world, 1000 MWe Rugeley Power plant in England, Pego 2×300 MWe in Portugal and 2×615 MWe Paiton Indonesia (+800 MWe new) all burning high LHV bituminous coal.

At this time of global warming, world uprising climate change, there is no excuse, no luxury for Operators not having sufficient E/Ps, not installing FGDs whatever local emission regulations. All these reference plants are not constructed by the Company but purchased after construction in privatization, and all of them have same common environmental sensitivity weaknesses.

Their plants are seriously lacking environmental equipment, ESPs are not sufficient to collect all outgoing fly-ash, and first two references do not have FGD systems at this point. First two plants' FGD systems are added nowadays after so many years of operation and air pollution, due to local or international public pressure.

The Foreign Partner has to have more environmental sensitivity in their own plants. They have small E/Ps and lack of FGDs in their coal plants. That means they can not collect dust properly, they can not collect sulphur but pour all to atmosphere.

Should we interpret this situation as opportunism, or greed, or ignorance to public health and safety?

Which state of art technology will be employed in the plant design? And what employment opportunities are waiting for the local people??

How should we interpret? Is that they presume all local people ignorant, illiterate, unable to make calculation, unable to read technology?

They have money to invest in poor technology with no care to beautiful environment of the Black Sea coast, we need electricity generation and we comply with all that information rubbish. Is this what is expected?

We understand that the partners will finance the project 30% from their own sources and the remaining 70% through project financing.

That means they will need serious bankable feasibility and EIA reports with full compliance to European standards and norms to emission limitations.

They will need serious plant design, to run smoothly for many years. They will need full compliance to local and EU laws and regulations and local expectations for maximized local employment.

We only get pleased to read such news on new energy investments in our local energy market, provided that

They are designed environmentally friendly, to enable low CO2 emissions, even employ CCS technology,
They consume maximized amount of local coal,
They have E/Ps, FGD, CCS fully installed and operated, and they meet EU emission standards,
They have completed all obligations for Environmental Impact Assessment Reports,
They receive their license from the Local Regulatory Board,
They are designed by local engineering companies or in-house engineering as much as possible,
They are fabricated in the local fabrication plants as much as possible,
They are installed by our local contractors,
They are commissioned and supervised by our local engineering power,
They are operated by our own local staff, and
Regularly checked by our own Labor force in programmed maintenance.

We only get pleased to read investment, and sincerely feel that energy investors deserve all our support to complete those power plant investments.

On the other hand, there is great risk in project finance of such investments due to public response.

Partners should make the risk assessment for coal supply and electricity sales.

Those companies, who are ignorant of local workforce employment expectations, and neglecting local engineering contribution, neglecting world class environmental limitations, will surely deserve the highest level of local resistance in legal platforms.

They may have too much of a headache during project execution; therefore, the project finance institutions should make their risk assessments carefully.

We would like to warn them not to make any technical mistakes in their power plant design, avoid incorrect selection of the necessary basic equipment, as well as environmental requirements, and wish them to operate the plant for many years, to generate electricity which will push our economic prosperity.

The investors should feel comfortable that we shall be warning them for proper design, sourcing fabrication, site installation, logistics, and public approvals. We all expect that these energy investments will bring prosperity, employment and peace to the site and the nearby community.

Maximized local manpower, as well as maximized local engineering/ fabrication/ site installation capabilities should be employed.

May God bless them with wisdom for all those who need. May God save you and forgive you for making any mistakes in your risk assessment.

God bless you all.

Haluk Direskeneli, Hamburg based Energy Analyst,

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