National Transmission Grid Project

PROJECT BRIEF 

BACKGROUND: Turkey is in the process of restructuring its electricity sector. As part of this process, the Government passed an Electricity Market Law which created an energy regulator (EMRA) and separated (TEAS) into a generation company (EUAS), a transmission company (TEIAS) and a trading company (TETAS). A competitive electricity market is being created. In addition the Government is planning to privatize most of the state-owned thermal generation capacity and most of the country’s electricity distribution assetsbut not the transmission system. The new structure, with private ownership of generation and distribution assets, is expected to be more efficient than the current state owned system, should produce lower prices in the longer term, and should avoid the Government having to take on further large contingent liabilities.

The project was restructured in the first quarter of 2002 to reflect the fact that TEAS, the original borrower under the project had been unbundled. The original loan of $270 Million to TEAS was split into two loans, $ 250 million to TEIAS, and $20 Million to the Government.

PROJECT OBJECTIVE: The restructured project is designed to assist with the creation and organization of the national transmission company (TEIAS) and provide investment funds for it.  In particular, it provides funding for consulting services to assist with the organization of the new company and development of its role as system operator and for further construction of the high voltage transmission network. The $20 Million loan to the Government is designed to assist with establishing the new electricity market including providing funds for the regulator, EPDK, and other sector organizations such as TETTAS and TEDAS which are not covered under the loan to TEIAS.

PROJECT DESCRIPTION: The TEAIS loan provides funding for consulting services to establish an independent transmission company. It also provides funding for supply and installation of 380 KV and 154 KV transmission lines and substations and implementation of a load dispatch modernization system. The Government Loan provides funding for technical assistance to help establish EPDK and to help restructure TEDAS and to assist TETTAS.

IMPLEMENTING and MONITORING: The TEIAS part of the project is being implemented by the TEIAS PIU. The Government part of the project is being implemented by a PCU in EPDK.  The project is being monitored by the World Bank, Ministry of Energy and Natural Resources (MENR) and the Treasury.

BENEFITS: The main economic benefits should be: (1) the increased efficiency of the electricity sector as it is restructured; (2) avoiding the continued build up of contingent liabilities by Treasury; and (3) improved transmission capacity, which would reduce transmission losses and increase the reliability of electricity supplies.

PROJECT STATUS: The creation of a competitive electricity market was delayed from its schedule, but is now beginning to move ahead again.  The procurement of all the packages under the project is nearly complete, and TEIAS has requested an extension of the closing date to December 31, 2007 to enable the completion of the transmission lines.  All the transmission lines except for two, are proceeding well now, after all the problems related to expropriation and contractor-capability have been resolved.  It is expected that the remaining two lines which face delays primarily due to contractor issues will be remedied in June 2006.  The Bank will consider the extension request once the issues on the two lines are resolved.

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