Balfour Beatty quit Ilisu dam project in Turkey

Balfour Beatty, the international engineering, construction and services group, announced today that it was quitting the controversial Ilisu Dam project in Turkey. In a statement, the company said it was no longer pursuing its interest following, “a thorough and extensive evaluation of the commercial, environmental and social issues inherent in the project”.

Balfour was the main contractor on the dam, which aimed to form a reservoir on the upper River Tigris in the largely Kurdish southeast of the country. The project aimed at providing power to aid the industrialization of the region, would have meant the displacement of Kurdish residents and affected up to 60 000 people.

Environmental groups had expressed concern over the impact to supplies of water in the Middle East as a result of the necessary flooding and water diversion which would be required and which would have resulted in the destruction of ancient buildings.

With no appropriate solutions to the commercial, environmental and social issues in sight and no early resolution likely, Balfour Beatty said it believed that it was not in the best interests of its stakeholders to pursue the project further.

Commenting on the decision, Balfour Beatty chief executive Mike Welton said, “Our determination to consider this project in a thorough and professional manner has remained consistent since we were first invited to become involved. The urgent need for increasing generating capacity to meet Turkey’s development needs and for social and economic development in the region remains. We have, however, clearly reached a point where no further action nor any further expenditure by Balfour Beatty on this project is likely to resolve the outstanding issues in a reasonable timescale”.

The complex environmental and social issues which the project involves have been the subject of intensive study. A comprehensive environmental impact report, funded by the contractors and involving many months of intensive investigative work, was completed and published earlier this year. This study was carried out by a team of international experts to the best available international standards as defined by the US Ex-Im Bank and the OECD.

The report details the principal social and environmental issues associated with the dam’s development and construction and offers recommendations to the dam’s proponents, the Turkish General Directorate of State Hydraulic Works (DSI). Its recommendations set clear benchmarks which require substantial actions on the part of the customer and other Turkish government departments and agencies.

Commercial discussions between the DSI and the consortium of which Balfour Beatty is a part have also been under way for a considerable period. The parties have, however, been unable to agree in some areas and a number of commercial issues remain unresolved.

Given the substantial difficulties which remain to be addressed, including meeting the four conditions set by the Export Credit Agencies, Balfour Beatty believes the project could only proceed with substantial extra work and expense and with considerable further delay.

Balfour’s decision to leave the project pre-empts the British government decision on whether to grant it export credit financing – a decision that might have proved tricky after the dam failed a key environmental assessment in July. Trade and Industry secretary Stephen Byers attracted criticism earlier in the year when he indicated he was “minded to grant the financing”, ahead of the environmental report.

Balfour’s defection is the latest in a stream of bad news for the dam project, which has struggled to secure backing since its final designs were approved in 1982.

The Swedish construction firm Skanska quit the Ilisu project a year ago, citing the complexities of negotiating with the various parties involved.

After the defection of Balfour, only Austria’s VA Tech – which specialises in hydroelectric technology – is involved as a foreign partner in the consortium.

The British government Export Credits Guarantee Department, which had been due to help with financing, confirmed that Balfour’s pull-out meant that their involvement in the project was over.

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