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Cablegate: Turkey Passes Its Nuclear Energy Law

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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHAK #2755/01 3131720
ZNR UUUUU ZZH
R 091720Z NOV 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 4340
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHUNV/USMISSION UNVIE VIENNA 0168

UNCLAS SECTION 01 OF 02 ANKARA 002755

SIPDIS

USDOE FOR CHARLES WASHINGTON
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
STATE ALSO FOR EB/CBA FRANK MERMOUD

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EINV BEXP TU
SUBJECT: TURKEY PASSES ITS NUCLEAR ENERGY LAW

REF: A) ANKARA 1177
B) ANKARA 1121
C) 06 ANKARA 6056

SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY.

1. (SBU) SUMMARY: The Turkish Parliament passed the long pending
Nuclear Energy Law on October 8, after just two days of debate and
despite criticism from opposition parties and NGO's. The law is
expected to be approved by the President. The law establishes an
extremely rapid selection process, under which a tender will be
issued within two months and bids must be submitted within one
additional month. The law also allows for public, private or mixed
ownership companies. The speed and lack of transparency in the
selection process, the possibility of increasing the state's share
in electricity production and concerns about regulation of nuclear
waste will be major sources of concern for bidders, and may give
rise to legal challenges.

2. (SBU) BACKGROUND: The GOT's energy program calls for the
construction of three nuclear reactors producing 5000 MW. The
government has determined that Sinop, a province on the Black Sea
coast, is the best location for the first nuclear power plant.
Turkey has rich uranium reserves, and a nuclear power plant has been
on the GOT's agenda since the early 1960's. Despite lengthy
research and detailed preparation efforts, popular opposition,
environmental concerns, and tender irregularities led to the
cancellation of four prior tender processes (in 1960, 1968, 1974,
and 1998).

-----------------------------
Parliament Passes Nuclear Law
-----------------------------

3. (U) The Turkish Parliament passed the long awaited Nuclear
Energy Law on November 8, just two days after the bill's
introduction. The Parliament passed an earlier version of the law
in May, but it was vetoed by then-President Sezer for technical and
legal reasons. This revised version addressed Sezer's criticisms.
It will enter into force once it is approved by President Gul and
published in the Official Gazette.

The law was passed despite strong criticism of the law from
opposition parties and from NGOs, including Greenpeace and the
Electrical Engineers Chamber, who collected 100,000 signatures from
nuclear power opponents. In addition to general opposition to
nuclear power, there was criticism of the lack of transparency in
the company selection process.

4. (U) Here are highlights of the new Nuclear Energy Law:

-- The Turkish Atomic Energy Agency (TAEK) is required to set the
technical criteria for nuclear plants within one month after the law
enters into force. TAEK will also be responsible for regulating and
auditing the functioning of the plant until a new agency with these
duties is established.

-- The Ministry of Energy and Natural Resources (MENR) will issue
regulations within two months after the law enters into force, which
list the specifications, company selection process, land allocation,
license costs, incentives for infrastructure, fuel supply,
production capacity, amount of energy to be purchased, and basis on
which the energy unit price will be set. These regulations will
enter into force after approval by the Council of Ministers (COM).

-- Immediately after these regulations are issued, the State
Electricity Trading Company (TETAS) will announce a tender and bids
will be due one month thereafter.

-- Companies will be able to compete for the tender only if they are
eligible to meet the technical criteria set by TAEK. TETAS selects
the company with the best offer, and submits the decision for COM
approval. If the COM approves, it will authorize TETAS to sign a
contract with the winning company. The Energy Regulator, EMRA, will
then issue a generating license to the company, after which TETAS
can conclude an energy sales contract with the company. The
contract period cannot exceed 15 years following the date the plant
becomes operational.

-- In the energy sales contract, TETAS will agree to buy electricity
from the subject company. TETAS redistributes energy under contracts
with holders of wholesale and retail trading licenses.

-- MENR and the Treasury Ministry will establish two accounts, the
National Radioactive Waste Account (URAH) and the Decommissioning

ANKARA 00002755 002 OF 002


Account (ICH), to cover expenses relating to waste management,
including: setting up temporary and permanent storage areas;
construction of a storage facility; transportation and processing of
highly radioactive material; research and development activities for
management of nuclear waste; and dismantling costs. The company
will pay a 0.15 cent/kWh contribution to each of the two accounts,
URAH and ICH.

-- The company is responsible for provision of fuel for production,
in line with the criteria set forth by TAEK, and for dismantling of
the facility at the end of the operating period of the plant.

-- The law requires the company to have insurance to compensate for
any harm caused during construction.

-- In case there is an accident at the facility or harm from
handling of nuclear fuel or waste, the GOT will implement the 1960
Paris Convention and other related national/ international
legislation.

-- The bill allows great flexibility on ownership structure. It
allows the GOT to establish wholly public or mixed ownership
partnerships with the winning company, or to authorize existing
state companies to participate. The COM also can establish a
company to build and operate, or to contract with another company to
build and operate the plant. The private sector will hold shares in
such a company. The law is subject to the State Economic
Enterprises Law.

-- The COM may announce incentives for technological investments and
training of personnel.

-- The GOT will provide an easement on public land for the nuclear
plant free of charge. The company will be responsible for
dismantling the facility and returning the land to the GOT at the
end of the operating period in an environmentally appropriate state.
The ICH account will be used to cover dismantling costs. If the
ICH account is insufficient, the Treasury's compensation for
overruns will be limited to 25 percent of the amount accumulated in
the account and the company will be responsible for all additional
costs.

-- The law also provides certain incentives for coal plants with
more than 1,000MW installed capacity.

(SBU) COMMENT: The complexity of this new law results from both
meeting objections raised by President Sezer in his veto of the
earlier bill and some measures to counter potential opposition. The
inclusion of public and private investment models also indicates the
GOT's determination to eventually realize this project, although it
also gives rise to criticisms of lack of transparency. The law sets
some challenging deadlines for the company selection process,
particularly the requirement that bidders submit their bids within
one month after the tender is opened. Press reports indicated that
the GOT wants to have construction begin in March 2008. That would
only be possible if feasibility studies on the Sinop site already
have been completed and companies already have their bids more or
less ready. The speed and lack of clarity on the selection process,
the possibility of increasing the state's share in electricity
production and concerns about regulation of nuclear waste will be
major sources of concern for bidders, even if the process does not
face any legal challenges.

Wilson

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