Last week, Turkey announced that it has agreed on terms to construct a new nuclear power plant, aiming to reduce its dependence on hydrocarbon fuels. The nation imports 97 percent of its energy needs presently.
Mitsubishi Heavy Industries Ltd. of Japan and French reactor builder Areva SA (OTC: ARVCF) will head the $22 billion construction project.
This will be Mitsubishi’s first order since the Fukishima disaster of 2011.
Sources involved in the negotiation process said Turkey will hold a 50 percent stake in the 4,500-5,000 megawatt facility that will be located in Turkey’s Sinop province on its Black Sea coast. Mitsubishi will take 30 percent, and GDF Suez (OTC: GDFZY), who will operate the plant and round out the consortium, will hold the remaining 20 percent.
Areva will build the four reactors for the plant and provide necessary technology to ensure its operating success.
This is a big step for Turkey, who in the past three decades has refused to issue a single treasury grant for a nuclear project. The Sinop project shows great confidence that Turkey nuclear power is moving into the future.
Moving Forward
Japanese Prime Minister Shinzo Abe and Turkey’s Recep Tayyip Erdogan met in the capital of Turkey, Ankara, to sign and finalize the project, as Businessweek reports. This project will be the second nuclear power plant in the region.
GDF Suez will most likely operate the plant with a local partner, but that is still a long way off, as its impact on Turkey’s energy won’t be seen until its projected 2023 completion. Turkey will continue to rely heavily on foreign energy supplies for the foreseeable future, and the country’s dependency will likely not change in any meaningful way.
And Turkey still needs to create a nuclear safety authority that will grant building permits to projects like this one.
GDF Suez, in the meantime, is seeking to push ahead with projects outside of its home base in France. It will seek out countries such as the U.K. and maybe even Brazil.
In the time that Turkey waits for permits and eventual construction to take place, it will continue to be an ever-increasing energy dependent nation. While the accord of this project is a major step forward, it’s still in all likelihood at least ten years away from fruition.
Turkey imported $60 billion in energy for 2012 and has the third highest deficit of any country in the world. A new power plant could potentially reduce that deficit by $3 billion, Businessweek reports.
And if you pair that with a similar facility with Russia’s Rosatom Corp and ZAO Atomstroyexport, Turkey can seriously cut into its deficit.
Specifics about potential Turkish partners weren’t immediately given, and a commitment to begin development wasn’t disclosed, but a likely timeframe may be somewhere around 2017.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to is join our Energy and Capital investment community and sign up for the daily newsletter below.
Japanese Expectations
Whenever the ball does eventually start rolling, there are high expectations for the plant—especially for Mitsubishi Heavy, who has been unable to secure an order for construction since the Fukushima meltdown in 2011.
Confidence had been stripped from the company in wake of those major natural disasters. But this project is a positive sign that countries are willing to overlook an unfortunate turn of events and once again turn to a leader and expert in the industry for their energy needs.
Japan itself is still feeling the effects of 2011. Of the 50 reactors in Japan, all but two remain shut down to this very day after three meltdowns. They are deemed unsafe and unfit to allow workers to continue daily operations.
The nation is hopeful that with new safety measures, operation can eventually start back up, but for now, projects like the one with Turkey are crucial to companies such as Mitsubishi Heavy.
Many skeptics were unsure if Japan could recover from the hit it took to its safety reputation, but the Sinop project symbolizes that Japan still has what it takes to build a dependable plant for other nations.
There were many other interested parties bidding for the Sinop project; groups from China, South Korea, and Canada all wanted in, but Turkish officials went with Japan over what it claims to be more technical terms.
And now, with faith being restored to Japan, developing countries looking to expand nuclear programs will be more prone to remember the Japan prior to 2011—the expert in energy power with a prestigious reputation.
If you liked this article, you may also enjoy:
