Turkey - National Transmission Grid Project

Report No. PID6281 Project Name Turkey-National Transmission Grid Project Region Europe and Central Asia Sector Energy Project ID TRPE48852 Borrower Turkish Electricity Generation and Transmission Corporation (TEAS) Implementing Agency TEAS Inonu Bulvari No. 27 06490 Bahcelievler, Ankara, Turkey Tel: 90-312-222-1231 Fax: 90-312-213-2301 Environment Category B Date This PID Prepared November 25, 1997 Projected Appraisal Date March 1998 Projected Board Date June 1998 Country and Sector Background Turkey presently has an installed power generation capacity of about 21,000 MW (40w hydro, 60t thermal, mainly based on local coal/lignite) and an extensive transmission and distribution network which provides access to electricity to almost 100w of the population. Electricity consumption has been growing at an annual average of 10t over the last decade and the power system at the moment is capable of meeting its peak power demand of about 13,000 MW. The demand for electricity is forecast to grow at an annual average of 89 over the next 15 years, as a consequence of economic growth and the low levels of per capita electricity consumption (1300 kWh in Turkey compared to, e.g. 11,000 kWh in the US). This will require annual investments of about US$3 billion, comprising on average, US$2.1 billion for generation, US$300 million for transmission system extension and reinforcement, and about US$800 million for distribution system strengthening. These levels of investments cannot be mobilized by the public sector, given Turkey's present situation. Also, considerable problems have plagued operations of the existing power infrastructure. In generation, the plant availability factor has remained low (40w - 60%); the losses in the transmission and distribution network continue to be high, at 18% of total generation (mainly in distribution). The Government's Strategy. Recognizing these problems, the Government of Turkey (GOT) is taking a two-pronged approach to sector development, one aimed at revamping the policy and concomitant legal/regulatory framework to attract a much larger level of private sector investments to finance the expansion of the sector; and the other aimed at privatizing existing power infrastructure. The Government's strategy for the development of the power sector is as follows: - public sector thermal generation plants will be separated and privatized on a Transfer-Of-Operating-Rights (TOOR) basis;  - distribution facilities and services serving urban areas will be transferred to the private sector either on a TOOR basis or through partial divestiture through share sales; in order to strengthen and expand the distribution networks; - the national transmission grid and load dispatching facilities, which will remain in the public sector, will be separated (from generation) providing equal access to all generators; and the transmission system will be strengthened and expanded; - new investments for the sector, particularly for generation capacity expansion, will mainly be mobilized from the private sector, through Build- Operate-Transfer (BOT); Build-Own-Operate (BOO) and other independent power producer (IPP) mechanisms; - a transparent regulatory framework will be set up to regulate the various entities; and competition will be introduced wherever possible (e.g. generation). The Turkish authorities have already begun the implementation of the sector development strategy. 1. Project Objectives. Objectives are: (a) to ensure adequate transmission system capacity to meet 8t p.a. electricity demand growth; and (b) to facilitate private sector participation in the sector 2. Description. The proposed Project would comprise: (a) financing a 3-year time slice of the transmission system investments; and (b) technical assistance to : (i) develop and implement a transmission policy (including equal access and transmission pricing policies); (ii) institutional development of the national transmission grid company; and (iii) prepare TEAS to access the international debt markets under the Bank's partial guarantee program. 3. Financing. The proposed financing plan is as follows: US$M World Bank - Loan 240.0 TEAS 210.0 Total Financing Required 450.0 4. Implementation. TEAS, the borrower of the proposed Bank loan, is responsible for the preparation and implementation of the proposed National Transmission Grid Project. 5. Lessons learned from past operations in the country/sector. Resolve all policy issues affecting the project before loan/project approval; and ensure a simplest possible project design. 6. Environmental Aspects. There would be no significant environmental impacts under the project, since most of the investments would be for reinforcement and capacity expansion of existing transmission lines. TEAS would carry out the environmental studies in accordance with World Bank Environmental Assessment Sourcebook (Update Number 11, Environmental Auditing) to determine if there are any environmental, health or safety issues associated with the existing network. 7. Project Benefits. The project will:; (a) improve transmission system efficiency and therefore reduce network losses, thus benefiting the electricity consumers; and (b) facilitate realization of private investments in generation and distribution, thus lowering the role of the state in the -2 -  power sector. 8. Project Risks. (a) GOT's "staying the course" on the reform path; (b) insufficient private sector investment into the energy sector due to political instability; (c) impact on the project implementation and timetable from changes in government and/or borrower's management Contact Point: Raghuveer Sharma The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)473 2302 Fax No. (202) 477 7977 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending May 1, 1998. - 3 -  Annex In accordance with the Bank's Environmental Policy (OD 4.01: Environmental Assessment) a "Category B" rating for environmental analysis has been assigned to this project, because most investments would be directed at reinforcement/capacity expansion of existing transmission lines. There will, however, be investments for new transmission line "spurs" within the system; and additional substations. Therefore, the environmental analyses required for the proposed project will be of two types: (i) an environmental audit for the existing system; and (ii) a series of "mini" environmental assessments (mini EAs) for the new transmission lines and substations. Brief description of these two types is presented below. - Environmental Audit. Environmental audit for existing transmission network will be carried out to: (1) assess compliance with current Turkish environmental regulations, (2) identify any environmental liabilities associated with current operation, and (3) assure that reinforcement will both maintain compliance with Turkish regulatory requirements and maintain any potential adverse impacts within acceptable limits. - New Line Additions - Mini Environmental Assessment ("Mini EA"). The "mini EA" will be to assess potential impacts associated with the new construction activities planned under the project, and prepare an environmental management plan (EMP) to mitigate these impacts and monitor the performance of the mitigation. Turkish Electricity Generation and Transmission Corporation (TEAS) has developed capability to perform the required Environmental Analyses; and therefore will carry out the analyses. The only limitation might be insufficient staff available to maintain the environmental work schedule with the anticipated investment schedule. If this situation occurs, TEAS will recruit external consultants (domestic or international) to assist them in completing the work program. -4-