Boyabat hydropower project in Turkey.
Do?an, Do?u? and Unit have signed a US$750m loan with four local banks for the 513MW Boyabat hydropower project in Turkey. Total project cost will be about US$1bn, with sponsor equity providing the remaining funds The banks are Isbank, TSKB, Garanti and Yapi Kredi. The 12-year debt pays between 500bp and 600bp.
Due to the size of the reservoir, 65.4km2, the project is not eligible for the offtake price guarantee, which typically provides projects with an offtake agreement at 5.5 euro cents per kWh for the first 10 years of production. Construction is expected to take 54 months.
Boyabat is in Sinop province in the country"s Black Sea region, 15km southwest of Dura?an. The project will involve a concrete dam on the K?z?l?rmak River built by Do?u? Construction at Kepez strait. The dam will be 195m high from the foundation, with a crest length of 262m. Upon commissioning the dam will generate 1.5bn kWh/year.
Turkey requires 1,500MW to 2,000MW of new generation capacity annually to meet electricity demand that is growing by 6%−8% per year between now and 2017. Greenfield coal projects utilising domestic lignite supplies are inevitable, but come with high environmental costs and associated difficulty meeting carbon obligations and EU entry requirements.
Given gas prices of US$400/tcm, new gas-fired generation is estimated at US$0.11/kWh. State-owned wholesale trader TETAS cancelled the tender for the country"s first nuclear plant in November, unhappy with the high generation price offered by Atomstroyexport.
Turkey plans to develop 60TWh−100TWh of hydropower potential by 2023, but developing hydro projects in the country can be expensive due to taxes, including a tax to State Hydraulic Works (DSI) for water use of up to US$0.047/kWh. Neighbouring Georgia is pushing for companies to develop its own hydro resources, with Turkey providing the perfect export opportunity.
Georgia has the third largest undeveloped technical hydro potential in Europe at 72TWh. There is no specific tax on electricity generation for the first 20 years of operations, and the country"s 15% corporate tax is lower than Turkey"s 20%. Georgia also offers full BOO contracts, as opposed to 49-year BOTs in Turkey.
The government is expanding its transmission link to Turkey by adding a 500kV line within Georgia running 73km from Zestaponi to Akhaltsikhe, connecting to a 400kV line running 98km from Akhaltsikhe across the Turkish border to Borchka. In October, the EBRD, the EIB and KfW agreed to finance the ?260m project with loans of ?80m, ?80m and ?100m respectively. New renewable energy generation, including the recently launched Upper Mtkvari Cascade hydropower project, will be granted priority access.
The project was launched with an expressions of interest request on January 28 for a 137MW/219MW BOO scheme. The Upper Mtkvari scheme will cost either US$410m or US$604m, depending on whether a two hydro cascade or three hydro cascade system is used. Econ Poyry is advising the government.
A 70% debt requirement is expected, meaning US$287m of debt for the US$410m configuration, giving a DSCR of 1.8x in the first year of operations, or US$423m of debt for the US$604m configuration, giving a first-year DSCR of 1.95x. Base case assumptions give a nominal net project IRR of 13.3% with the third hydro, or 12.5% without, and respective net equity IRR of 20.8% and 18.9%.
The EBRD, EIB and IFC have all expressed interest in providing debt.
Pre-qualification will last until the end of May, with shortlisted companies then given a 60-day bidding period, ahead of a due diligence period for the tender winner of up to 24 months. Construction is expected to take 48 months, and commercial operation will then run for a minimum 60 years.
The two hydro cascade would comprise the 82MW Khertvisi and 55MW Aspindza hydros, generating on average 714GWh. The three hydro cascade would add the 90/82MW Niala pumped storage plant, and generate an average 1,205GWh. The pumped storage option has been proposed to benefit from the significant surplus of electricity in the Georgian market in the spring and summer, when prices are very low (around US$0.028/kWh average wholesale price between March and June 2009).
A PPA with Turkish wholesale traders will be critical to the project − up to 92% of the power will be sold into Turkey, though there are minimum requirements for domestic supply in winter. Average monthly wholesale prices in Turkey in recent years have been US$0.095/kWh (2007), US$0.12/kWh (2008) and US$0.093/kWh (2009). Gama is one Turkish wholesale trader to have already expressed an interest in offtaking.
A PPA with Georgian state firm Energy System Commercial Operator (ESCO) will provide for the winter offtake, where a price of US$0.048/kWh is guaranteed for the first 10 years of operation. The average wholesale winter price (October 2008 to March 2009) is US$0.047/kWh.
A pre-feasibility study has been developed, although design work and a full technical and economic feasibility study are yet to be completed and will be part of the concession.