Zorlu targets renewables and coal over gas // Platts
Published by Platts Energy in East Europe / ISSUE 264 / May 3, 2013
Justin Vela, Istanbul
Turkish independent power producer Zorlu Enerji is focusing its investments in renewables and coal to create a more balanced generation mix and reduce the impact of rising gas prices on its gas heavy portfolio. The third biggest of five electricity producers listed on the Istanbul Stock Exchange, Zorlu Enerji saw its operational profit eroded in 2012 for the second year running by gas prices rising faster than electricity prices.
The energy arm of the Zorlu Group posted a net profit of TRY 589 million last year on the back of a 19.9% rise in revenues to TRY 525 million but only because of a one- off gain of TRY 756 million from a reversal of losses as a result of the transfer of its stake in its Russian gas- fired power plant venture Rosmiks to its parent company last December. It was still a major improvement on 2011, when it reported a net loss of TRY 407 million.
“We don’t build our strategy only on gas prices, but focus on long term strategy in a broader perspective,” Ali Kindap, the company’s deputy general manager told Platts in an interview. With a goal to more than double its installed capacity at home and abroad to 1,500 MW by 2017, Zorlu is doing its best to “meet increasing energy demand in Turkey and globally in a rational and environmentally compliant manner,” said Sinan Ak, the company’s chief executive.
Zorlu currently has a total installed capacity of 771 MW with a portfolio of five natural gas power plants totalling 493 MW and a 135-MW wind park in Turkey and a 6-MW wind park in Pakistan. It also now has 142.6 MW through Zorlu Dogal Elektrik, acquired from its parent last year, comprising 112.6 MW at seven hydropower plants, one 15-MW geothermal power plant, and one inactive 15-MW diesel oil-fired plant. It is also involved in natural gas trade and distribution operations in the west and south of the country.
Currently its natural gas assets accounts for 65% of its total production capacity with renewable energy capacity equating to about 35%, Ak said, consisting of 262.6 MW of wind, hydroelectric, and geothermal resources.
This is, however, set to change, with the company, most notably looking to become a leader in geothermal energy. “Our country has a target to reach 600 MW of geothermal capacity by 2023 and Zorlu Enerji aims to produce half of this capacity,” Ak said.
Its single most intriguing investment is the Kizildere geothermal power project in the southwestern province of Denizli, which it aims to expand into Turkey’s largest such plant. It already possesses 30-year operational rights for a 15-MWe plant but plans to increase capacity to 95 MWe. The 80-MWe project referred to as Kilildere II will comprise a 60-MWe flash plant and 20-MWe bottoming cycle plant, with average annual production of 575 GWh. Construction began in 2011 and is expected to be completed by the third quarter of 2013. Construction work is being carried out by its in-house engineers with the steam turbine supplied by Sumitomo Corporation and manufactured by Fuji and bottoming cycle equipment supplied by TAS Energy.
The estimated cost for the Kizildere II project is over $200 million. The project is financed with support from two Turkish banks – Akbank and Garanti Bankasi. All licenses have been obtained and issued by the Energy Marketing Regulatory Authority. The power generated will be sold to the grid at a current feed-in tariff for geothermal energy of $0.105 per kWh.
According to Ak, drilling work for another geothermal power plant is ongoing in the Western Alasehir district, where Zorlu holds a license for a 30-MWe plant. Drilling for another geothermal plant in Simav, also located in Turkey’s Western Aegean region, is expected to begin this year.
Zorlu is not only focused on geothermal energy and natural gas. Its 135-MW Gokcedag wind farm in the southern province of Osmaniye has generated electricity at full capacity since 2010. Zorlu has generation licenses for two more wind power projects in Osmaniye province: a 50-MW park near the city of Saritepe and a 60-MW project in Demirciler.
In terms of further conventional thermal power capacity, Zorlu Enerji currently favours coal over gas, its chief executive told a conference in Istanbul in late April. Zorlu has postponed its plans to build a gas-fired plant in the country and instead will finalize an investment decision this year for a plant firing on domestic coal, with a maximum capacity of 1,000 MW, Ak said. That investment may cost more than $1 billion, he said, and Zorlu is in talks with Japanese and South Korean equipment suppliers.
Ak said that new capacity firing on coal made more economic sense than a similar plant firing on imported gas in a market showing signs of heating up. Central bank policies aimed at slowing inflation and reducing the current-account deficit have reduced electricity demand and created a surplus as new plants are added to the grid, Ak explained. “This is causing investors to be cautious about new investments, especially on gas-fired plants,” Ak said.
According to Turkey’s energy minister Taner Yildiz the power surplus was about 4,500 MW last year, or 7.8% of total capacity, and that figure may double to as much as 10,000 MW this year, Ak said.