Taqa signs $12bn coal plant deal with Turkey

Abu Dhabi plans to develop coal-fired power plants across Turkey at a cost of up to $12 billion.

Abu Dhabi plans to develop coal-fired power plants across Turkey at a cost of up to US$12 billion (Dh44.08bn).

The UAE and Turkey signed an agreement yesterday that will see the Abu Dhabi National Energy Company, known as Taqa, spearhead the massive project.

Growing ties in the energy sector between the two countries could even see Abu Dhabi invest in Turkey’s budding nuclear programme, Turkey’s energy minister said.

“We believe that the Turkish investment climate is right. We can only say that we will increase our investment in Turkey,” said Mohamed bin Dhaen Al Hamli, the UAE’s Energy Minister, who flew to Ankara to sign the agreement alongside his Turkish counterpart.

Yesterday’s deal clears the way for Taqa, a company that is majority-owned by Abu Dhabi, to build and operate a power generation base totalling 7,000 megawatts, or about 10 per cent of Turkey’s electricity needs by the time the plants are completed.

The agreement includes the development of lignite coal mines in the Afsin-Elbistan region in southern Turkey, where the plants will be built.

Taqa would operate in a joint venture with the Turkish government utility Elektrik Uretim. The plan provides for upgrading an existing power plant in Afsin-Elbistan, and encompasses four further large-scale plants.

Preparatory work for the first greenfield project will start immediately, as will the feasibility study for the next plant and the necessary mine development.

Taqa and Elektrik Uretim are expected to sell off stakes in the power projects to ease the financial burden, but maintain a majority shareholding.

The plants will be built consecutively, and it will take at least a decade until the construction phase is completed at a cost that could total $12bn.

Turkey’s energy sector is an attractive market for power companies. Driven by strong economic growth, the country’s energy needs are set to expand by more than 6 per cent a year during the next two decades.

Even as Abu Dhabi’s multibillion-dollar entry in Turkey’s energy sector was finalised, there was talk of further cementing ties with investment in Ankara’s nuclear programme.

Turkey will this month announce the winner of the tender for its second nuclear reactor, according to the energy minister Taner Yildiz. Four countries – South Korea, Japan, China and Canada – have companies bidding for the project.

Should the Korean Electric Power Corporation (Kepco) win, Abu Dhabi may become an investor in the Turkish reactor, said Mr Yildiz.

“If we prefer the South Korean’s, then the UAE will participate in the project in financial terms,” said Mr Yildiz, who has previously said that the Asian players are most likely to succeed.

Even if Kepco – which is currently building the UAE’s first four reactors – should not win the bid, Abu Dhabi could still come in as a financial partner.

“We welcome working with all companies,” said Mr Al Hamli. “We are ready to invest in feasible projects.”

Taqa holds a majority stake in all of Abu Dhabi’s large power plants, and in two plants in Fujairah. It also has electricity generating assets in the Middle East, Africa, India and the United States in a power portfolio of more than 15,000MW.

It was on course to win the tender for the first power plant run as a public-private partnership in Dubai last year, only to see the project postponed indefinitely.

The Abu Dhabi Water and Electricity Authority (Adwea) holds a controlling stake in Taqa, while Abu Dhabi’s Farm Owner Fund owns about 20 per cent of the Abu Dhabi Stock Exchange listed company.

On Wednesday, Taqa announced a $600m deal for a controlling stake in the Atrush oil block in Iraqi Kurdistan. Production at the field is expected to begin this year, making it the first hydrocarbon producing site for the company, which pumps oil in the United Kingdom’s North Sea, and extracts natural gas from fields in Canada.

While Taqa already owns a share in a power plant in Iraqi Kurdistan, producing oil in the autonomous region will not go down well with Iraq’s central government, which has a policy of blacklisting oil companies that sign oil contracts with the Kurdish Autonomous Region.