Cablegate: Energy Ministry Denies Bot Takeover Plans

This record is a partial extract of the original cable. The full text of the original cable is not available.

241339Z Oct 03

UNCLAS ANKARA 006696

SIPDIS

SENSITIVE

STATE FOR E, EB/CBED,EB/IFD AND EUR/SE
DEPTMENT PASS OPIC AND EXIM
NSC FOR BRYZA
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO
USDOE FOR CHARLES WASHINGTON
TREASURY FOR OSIA

E.O. 12958: N/A
TAGS: EINV ENRG ECON PREL TU
SUBJECT: ENERGY MINISTRY DENIES BOT TAKEOVER PLANS

REF: A. ANKARA 6612
B. ANKARA 6423

This message is sensitive but unclassified, not for internet
distribution. Please handle accordingly.

1. (SBU) Energy Minister Guler issued a statement denying
the GOT would consider seizing BOTs, but continuing to
pressure companies over high electricity prices. Separately,
in a meeting with Econoffs, the Energy Ministry
Undersecretary took a similar line. The ENRON BOT told Post
it has yet to be contacted by the Ministry. End Summary.

2. (SBU) On October 23, Energy Minister Guler issued a
statement denying press speculation that the GOT intends to
seize BOT facilities (Reftel A). Guler said that there are
four ways to resolve this issue: 1) mutual agreement; 2)
buyout; 3) arbitration; and 4) cancellation of contracts. He
said that the Ministry had been dicusssing these options for
the past three months, and that nothing has changed. While
complaining about high electricity prices (Reftel B), he said
Ministry was intent on getting what it deserved, nothing
more. He said that he preferred to solve the problems by
compromise but Turkey reserves the right to seek arbitration
to eliminate the injustice in this matter.

3. (SBU) On October 24 Econoffs met with Undersecretary of
Energy Demirbilek to clarify the GOT's position on BOTs.
Demirbilek also claimed that the Ministry has no intention of
taking over BOT companies. He said that the Ministry's
strategy is to allow the Energy Market Regulatory Authority
(EMRA) to put proposals to BOT's to ease the transition to a
liberalized market. He said that if EMRA cannot move
forward, then the Ministry would step in but the Ministry had
to be cautious because Turkey recognized that actions that
might be accepted for a contract party are not acceptable
when taken by the State. He said that the MENR has asked the
BOT companies to voluntarily lower electricity prices, but
some were more eager for an early buyout. He argued that it
would be impractical and costly for Turkey to exercise its
early buyout option at this time. From his perspective, if
the Ministry could lower gas prices to BOT companies by two
cents and capacity charges by 2-3 cents, the BOT companies
should be willing to lower their output prices. However,
Demirbilek claims the BOT companies have rejected this
compromise. (Comment: This may not be much of a compromise
because the contract states that if gas prices are lowered,
the change would be reflected in electricity prices.
Moreover, the GOT sells gas to BOT companies at a higher
price than to State-owned power plants. End Comment)

4. (SBU) While criticizing the contracts, Demirbilek
stressed that Turkey will not take any action outside the
framework of the contract. When asked about the allegations
of corruption, he explained that the Energy Ministry, which
signed the orignal contracts, had not fully evaluated the
details. He said that the AK Government had not launched a
corruption investigation but was researching the terms of the
contracts as any other new government has the right to do.

5. (SBU) The General Manager of one of the BOT companies,
ENRON/Trakya, contacted us on October 24 after returning from
a Board meeting in London. She noted that the company was
following the press reports closely, especially speculation
that the Energy Ministry would invite companies to
negotiations next week. She said that the creditors should
be present at any such meeting but that the Energy Ministry
still had not contacted the companies. The company is
seeking clarification on the government's next steps.
EDELMAN

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