Rehabilitation scandal at power plant

Turkey has returned a 280 million-euro loan to the World Bank after failing to organize a tender to rehabilitate a power plant in line with the lender’s standards.

The state-owned Electricity Generation Inc. Co., or EÜAŞ, had taken the loan to finance the rehabilitation of the Afsin-Elbistan power plant in Kahramanmaraş in Southeast Turkey three years ago.

With monthly expenses over the three years surpassing 50,000 euros, an additional cost of 1.2-1.8 million euros has already occurred and no work has been done.

The power plant is one Turkey’s largest and has installed power equal to 1,355 MW. It has been operating, however, at just 300 MW for years and has created significant losses for the public sector. The cancellation of the tender process by the Ministry of Energy and Natural Resources, which aimed to sell the power plant after rehabilitation, has revealed a change in the ministry’s policy.

The Afşin-Elbistan A power plant started operating in 1984. German Babcock produced the boilers and Alstom provided the generators. When privatizations came up, the ministry decided to privatize its power plants following rehabilitation. After obtaining financing from the World Bank for the power plant, the ministry found it could not begin rehabilitating it because Babcock, an original participant in construction of the plant, had gone bankrupt. Therefore, it was required to seek new firms for rehabilitation through a tender. The use of the World Bank loan necessitated the implementation of the procedures of the bank in all processes of the tender. However, problems occurred concerning the compliance of the specifications with the World Bank policies.

Although the tender was announced first in July 2006, no bid was offered till 2008. The ministry offered a new tender in November 2008 after a change in the package, and the preliminary qualifications were obtained in March. The decision to annul the tender came up just as it was expected to take place this month.

Meanwhile, it causes concerns in the sector that the power plant has been inactive for at least five years, despite the forecast of a supply deficit in electricity by 2012. The plant, which the ministry has been trying to rehabilitate since 2004, has caused losses for the ministry due to its low generation capacity and high costs.

The plant also has been criticized for damaging the environment. The rehabilitation through the loan of the World Bank would have enabled the installation of electrostatic filters that would prevent pollution, but with tender canceled, the plant will continue to disperse hazardous smoke.

According to a World Bank report, the plant is unable to use more than 75 percent of its capacity at present. The bank had allocated the loan with a maturity of 15 years, including a non-payment period of five years.