Siân Green

Turkey’s Iskenderun power plant is due to start up in 2003 and will play a key role in helping the country to meet generating capacity, environmental and energy policy goals. PEi visits the site to check the progress of this milestone project.

In the southeast corner of Turkey, overlooking the Bay of Iskenderun, a new power plant is rising from the ground in the 40-degree heat. With some 4000 workers on-site, construction is now at its peak and while the Iskenderun coal fired power plant is a key project for Turkey, it has presented its developers with some major challenges.

When the $1.5 billion, 1200 MW power plant comes on-line in late 2003, it will supply around eight per cent of Turkey’s electricity demand, which between 1990 and 2000 doubled from 57.5 billion kWh to 125 billion kWh. Electricity demand is projected to rise to around 310 billion kWh by 2010 in spite of the country’s economic crisis, which caused a drop in demand in 2001.

Iskenderun is on track to start commercial operation on schedule in spite of the many challenges faced by the developers
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Installed capacity in Turkey stood at 28 000 MW in 2001, and in order to meet rising demand, the country needs to add 3000 MW of capacity per year to its installed base. This equates to an average annual investment of $4 billion.

Market reform

Turkey recognised early on that it would need to attract the private sector to its power industry to continue meeting demand, and embarked on reform in the mid-1980s. Its first step was to introduce independent power producers (IPPs) to the market through a build-own-transfer (BOT) model, under which a total of 22 projects with a total capacity of 2325 MW were approved.

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Later, in 1997, further reform took place with the build-own (BO) model, under which five independent power projects were approved with a total capacity of 5820 MW. Four of these projects are natural gas fired, while one – Iskenderun – uses imported coal.

The decision to use imported coal for one of the five BO model IPPs was part of the Turkish government’s aim to diversify the country’s generation fuel mix and improve energy security. Turkey’s current generation fuel mix is dominated by hydropower, and although natural gas will help to diversify the fuel mix as well as meet environmental goals, Turkey is wary of encouraging a ‘dash for gas’.

The use of bituminous coal also has other advantages, according to Karl Schnadt, CEO of Iskenderun Enerji Üretim Ve Ticaret AS (Isken), the company which, in 1998, won the build-operate contract to develop Iskenderun. The fuel has a high availability of reserves, is a low-risk material to transport, is easy to ship and store, unaffected by global events and is also competitively priced.

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The use of imported hard coal will therefore help to ensure that power from the plant is competitively priced. This is important for the Turkish government and for TETAS, which will take power from Iskenderun under an energy supply agreement (ESA) signed in 1999.

Under the ESA, Iskenderun guarantees an availability of 86 per cent and will sell at least 85 per cent of its output to TETAS.

Iskenderun will generate power at an average cost of ¢4.1/kWh (levelised cost including investment, fuel, operation etc). When the ESA terminates after 20 years, Isken will be able to sell power into the wholesale market – which should by then be fully liberalized – at a highly competitive price as the plant’s investment costs will have been sunk.

Environmental goals

The Iskenderun plant will meet Turkey’s environmental goals, operating within the World Bank’s limits for particulates, NOx and SOx. It will also meet targets for water pollution, noise and byproduct management, and is designed to withstand an earthquake of 6.5 on the Richter Scale.

Isken – which is 75 per cent owned by Steag and 25 per cent by RWE Power – was required to carry out an extensive environmental impact assessment (EIA) of the Iskenderun project prior to construction. This was carried out in consultation with lenders and advisors – including the World Bank – and also included a period of public consultation. During the public consultation, Isken shared information on the project with local leaders, non-governmental organizations (NGOs) and local and regional authorities.

The unemployment rate in the south-east of Turkey is high (around 20 per cent), and the economy is dominated by agriculture and characterized by low-paying jobs and a low level of education. The project, says Isken, will have positive socio-economic impacts, including infrastructure development, job creation and economic growth.

Project structure: Isken will own and operate the plant for 20 years under the terms of the BO contract
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The approval of the EIA by the Ministry of Environment – a precondition for financial close – was achieved in June 2000.

Environmental management and monitoring is on-going throughout the construction period in compliance with the EIA. Isken is monitoring the impact of construction activities on soil, water and air, and must ensure compliance with the Constructors Environmental Management Plan (CEMP). This compliance is certified by independent environmental consultants.

Dr. Sirri Uyanik, general manager of Isken, points out that prior to construction, some 43 different permits had to be obtained from eight different ministries in Ankara and 13 local and regional authorities for planning and environmental authorization purposes.

To meet environmental targets, environmental protection measures have been integrated into the design of Iskenderun by both Isken and the Siemens-led consortium responsible for the engineering, procurement and construction of Iskenderun. This consortium, consisting of Siemens, Babcock Borsig Power and Turkish company Gama Tekfen, was awarded the $800 million EPC contract in June 2000.

Air pollution prevention measures include the use of high quality coal, electrostatic filters, low-NOx burners and flue gas desulphurization (FGD) units. Each of the plant’s two boiler units will be equipped with an electrostatic filter unit. Together with the FGD, ash removal efficiency will be 99.5 per cent and ash content in the flue gas will be less than 50 mg/Nm3. The FGD units will remove SOx from the flue gas using limestone. SOx emissions will be less than 400 mg/Nm3.

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Byproducts from these processes – ash and gypsum – can be used in the construction industry and Isken is currently in talks with a number of companies for the sale of these products.

Iskenderun takes its cooling water from the Bay of Iskenderun and several measures have been taken to prevent water temperatures being affected. The regulations on cooling discharge were a big challenge for the developers, according to Isken, and resulted in the construction of a deep sea discharge and diffusion system consisting of four 2.8 m-diameter pipes stretching 1200 m out into the Bay of Iskenderun.

Coal challenges

Another major challenge for the project developers was how to transport coal to the power plant. Under the terms of a fuel supply agreement between Isken and German coal company RAG Trading, RAG will supply Iskenderun with 3 million t/a of bituminous coal for a period of 16 years. Coal will be sourced from South Africa, Colombia, China and the USA.

Coal will be transported to Iskenderun by ocean vessels. However, these require a minimum water depth of 25 m and are therefore unable to get close to the shore at Iskenderun. It was initially thought that a 2 km-long jetty would be needed to unload coal from the ships, but the project designers came up with an innovative solution that only requires a 600 m-long jetty.

The solution was to construct a ‘transhipment’ system consisting of a floating unloading platform in the Bay of Iskenderun which unloads coal from ships onto barges. The barges take the coal to the jetty, where it is unloaded and transported by conveyer belt to Iskenderun’s coal storage facility.

The floating platform weighs 6000 t, is 108 m long and 48 m wide, and is the only unloading platform of its kind in the world for coal vessels. It has an unloading capacity of 30 000 t/day, and will be manned by a permanent live-in crew of 24. There will be two barges transporting coal to the jetty.

Construction of the transhipment vessel was completed in July 2002 and the vessel has embarked on a 4000 km journey from the Polish harbour of Gdansk to Iskenderun, where it was due to arrive in August. The two barges are expected to arrive on site in September 2002.

On track

The project reached financial close in June 2000. Financing for the $1.5 billion plant consists of 25 per cent equity from the plant’s shareholders, and 75 per cent credit from three main banks: Dresdner, KfW and WestLB. Iskenderun was one of the last projects in Turkey to receive a 20-year treasury guarantee.

Notice to proceed was given to the EPC consortium at the end of June 2000, and erection of the boiler steel structure started in April 2001.

Construction at the Iskenderun site has now reached a peak, with civil works almost complete. Mechanical works reached about 60 per cent completion at the end of July and in spite of some minor delays, Isken believes that the project is on target for its provisional acceptance certificate (PAC) date of 23 November, 2003.

The first of the two boiler islands, constructed by Babcock Borsig Power, is nearly complete and pressure testing was due to start in early August 2002. Pressure testing of the second unit should start in October. The first initial fire (with oil) of unit one will take place in December 2002, and of unit two in January 2003. Synchronization will begin in March 2003.

With Babcock Borsig AG, Babcock Borsig Power’s parent company, now insolvent, Isken and Siemens are negotiating with receivers to ensure that progress on the Iskenderun plant is not affected. The EPC consortium has continued to procure materials for the boiler island and Babcock staff remain on site.