BMI View: Turkey's energy and utilities sector is continuing to produce opportunities amidst the government's privatisation drive , nuclear ambitions and desire for more coal fired generation capacity. These factors underpin our bullish outlook for the energy and utilities infrastructure sector, which we forecast will grow in real terms by 7.6% in 2013 and then go on to average year-on-year (y-o-y) growth of 6.6% between 2014 and 2022.
The announcement that a Chinese-Turkish joint venture (JV) has finalised a contract to build a coal-fired power station in north-western Turkey is in line with our view that coal will become an increasingly important component in Turkey's energy mix ( see our online service, March 8 2013, Saudi Entry Into Coal Sector Confirms Trend) .
The new station will be built by Turkey's Hattat Holding and China's Harbin Electric International , and has a proposed capacity of 2640MW and will cost US$2.4bn to develop. South Korean, Western and other Chinese firms were also interested in the project, which follows the trend of foreign players being attracted by Turkey's energy infrastructure development plans. Companies from Saudi Arabia and the UAE are already involved in the development of Turkey's coal-fired capacity.
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|Turkey Energy And Utilities Infrastructure Industry Value (US$bn) And Real Growth (% y-o-y)|
Currently, Turkey's energy mix is dominated by natural gas. Indeed, we have highlighted the risks of Turkey's energy dynamics in the past with regards to reliance on imported fuel ( see our online service, April 29 2013, 'Pushing The Economic Case For Coal' ). Both in response to large lignite coal reserves discovered and in an attempt to reduce the current account deficit, Turkey has begun to shift its policy towards the promotion of more coal - fired electricity production. To encourage this move the government has set the ambitious goal of attracting US$25bn of investment into coal generation projects, with the aim of producing 30% of its electricity through the resource by 2023.
Off the back of the Turkish government's privatisation of the country's existing energy assets, for example the sale of the 600MW Seyitomer power plant to Turkey's Celikler Insaat for US$2.25bn in January, we currently forecast that the energy and utilities infrastructure industry will grow by 7.6% in 2013 and then go on to average year-on-year (y-o-y) growth of 6.6% between 2014 and 2022 .
However, we are still waiting until more progress is made on the development of the two nuclear power stations already awarded to successful Japanese-French and Russian bidders to fully integrate the nuclear projects into our forecasts. Coupled with the increasing activity surrounding both the coal and renewables industries , there is strong potential for more opportunities in Turkey's power sector and thus we highlight the upside potential to our already bullish forecasts.