IBS Power Probe, Turkey

Summary

Life is not what it was. A year ago, Turkey was on a roll, and power developers were looking to a decade of opportunity. Today, it is a whole new world, with the banks talking of retirements being needed. Part of this is to do with a new consensus on how fast the country can grow – and a change in expectations. But much of it reflects realities already evident today. Demand for power has not been growing as it used to. A flurry of new projects has hit the grid. Prices are low, far lower than the forecasts used by investors earlier this decade.

What's wrong?

Life is not what it was. A year ago, Turkey was on a roll, and power developers were looking to a decade of opportunity. Today, it is a whole new world, with the banks talking of retirements being needed. Part of this is to do with a new consensus on how fast the country can grow – and a change in expectations. But much of it reflects realities already evident today. Demand for power has not been growing as it used to. A flurry of new projects has hit the grid. Prices are low, far lower than the forecasts used by investors earlier this decade.

What does this mean for investors? How much space is there for new gas projects? How many of today’s 44 GW of gas project stock will fall by the wayside or be cut back by the banks? When the Government’s privatization programme resumes, will there be any space in it for foreign companies, or is the field going to be exclusively for Turkish players? How will the mega-lignite projects of Afsin-Elbistan and Konya Karapinar advance? And what are the prospects for nuclear plants on the one hand and carbon taxation on the other?

The merchant private sector now accounts for 40% of generation, excluding state owned EUAŞ. Liberalization is a reality in power, but how far is it held back by continuing rigidities in gas?

Turkey – Is there anything wrong? is one of the IBS Probes prepared for our clients. The table of contents of this report, to be released in mid-2014, is: