Dr. Nejat Tamzok
Designing the Turkish coal industry structure on the basis of state owned enterprises dates back to 1935.
That year, the Mineral Research and Exploration Institute, Electrical Power Resources Survey Administration and Etibank Administration were established concomitantly. Establishing and operating the coal mines and coal-based power plants were among the organizational goals of Etibank. Thus, the central institutional structure that did not previously exist emerged for “coal works” too as for “energy works”.
All coal mines in the Zonguldak Basin and some lignite mines such as Seyitömer and Tunçbilek were transferred to the Etibank Administration within a very short period of time. By the time the Second World War came to an end, all of the hard coal production and approximately 80% of lignite production were made by the public administrations.
In 1957, Turkish Coal Enterprises (TKI) was established and all coal fields of Etibank were attached to this institution. Coal-based thermal power plant projects came to order with the oil crises of the 1970s and a large number of privately owned lignite fields to be used for electricity generation purposes were transferred to TKI under the “Law on Mines to be Operated by the State”.
After these arrangements, lignite production projects that would provide the fuel needs of the large-scale thermal power plants such as Seyitömer, Tunçbilek B, Soma B, Yatağan, Yeniköy, Kemerköy, Afşin-Elbistan A, Çayırhan, Kangal and Orhaneli were devised rapidly by TKI. Lignite production exceeded over 60 million tons in 1990s while the figure was only about 6 million tons in 1970.
Turkish Hard Coal Enterprises (TTK) was formed in 1982 and all the coal mines of TKI in the Zonguldak Coal Basin were attached to this institution.
Sivas-Kangal coal mine in 1989, Afşin-Elbistan coal mine in 1995 and Çayırhan coal mine in 2000 were transferred from TKI to the Electricity Generation Company (EÜAŞ). Thus, a third public company had become a part of the Turkish coal industry by 1989.
State owned enterprises’ dominant structure of the sector remained largely unchanged until 2013 while all these developments were going on. All of the hard coal production was made by TTK while 90% of lignite production was by TKI and EÜAŞ.
Over time, state owned enterprises preferred to receive services in coal production, stripping operations from the private companies in increasing rates of up to 60-70% instead of using their own machine parks. However, the privatization of the coal fields through transfer or sale did not come up too much.
However, the disappearance of the nearly 80-year public-dominant structure of Turkish coal industry will no longer surprise anyone concerned with the subject. Given the gaining momentum of the recent work in this direction, public enterprises are highly likely to leave their places to the private sector in a short time.
In this regard, the most striking developments are taking place in the ongoing privatization process of the power plants within the scope of electricity sector restructuring. The clear results concerning the transfer of the coal fields to the private sector began to emerge with the acceleration of the said process carried out by the Privatization Administration and the Ministry of Energy and Natural Resources.
Here was the first result in Seyitömer in June 2013. Seyitömer coal fields of TKI were transferred to the Çelikler Seyitömer Electricity Generation Company together with Seyitömer Power Plant under the contract of transfer of operating rights.
In August of the same year, this time, the Sivas-Kangal coal fields that were operated by the private sector previously on behalf of EÜAŞ and Sivas-Kangal Thermal Power Plant were transferred to the Konya Şeker-Siyahkalem Joint Venture Group under the same model.
Çatalağzı Power Plant fed by hard coals produced by Turkish Hard Coal Enterprises in March 2013 and TKI’s coal fields in Muğla province along with Kemerköy, Yeniköy and Yatağan Power Plants in August 2013 were included in the privatization program.
If serious obstacles will not arise in the global or local markets, the transferring of Soma, Çan, Orhaneli and Tunçbilek coal fields with thermal power plants that they are feeding to the private sector in a very short time will not be a surprise.
As for Afşin-Elbistan Lignite Basin which has the most important part of the Turkish lignites with approximately 5.5 billion tons, it appears to be a very different privatization formulation quest than those quoted above. Here, after a series of failed attempts, it is understood that a public-private partnership model including international collaborations is being insisted on.
In this context, an inter-governmental agreement which includes construction, operation, rehabilitation and the modernization of an 8,000 MW capacity power plant and the development of new coal fields was recently signed between EÜAŞ and Abu Dhabi originated TAQA. However, the attempt was not successful and ended with TAQA’s decision to postpone the project. However, it is frequently heard in the news that similar initiatives for the Afşin-Elbistan Basin with other countries is being conducted.
In a different lane, studies related with the transfer of the coal fields of TKIs to the private sector by royalty method are continuing while the privatization process of the coal fields together with the power plants are going on. In the model developed, coal-fields are being transferred to the private sector provided that they will build a power station, by a method that can be summarized as taking a share by the public authority from unit electricity energy produced from coal.
Within the scope of this model; the Şırnak-Silopi Asphaltite Field was transferred to the Park Group in 2003, Bolu-Göynük Field to AKSA Göynük Enerji Company in 2006, Eskişehir-Mihalıççık Field to Adularya Enerji Company in 2007, Adana-Tufanbeyli Field to TEYO Company, some coal fields in the Manisa-Soma Basin to Hidro-Gen (Kolin) Company, Bursa-Keles Harmanalanı and Davutlar Fields to Çelikler Company in 2012, Kütahya-Domaniç Field to Çelikler Company and Bingöl-Karlıova Field to Flamingo Company in 2013. The total installed capacity of the power plants to be fed by these transferred coal fields exceeds 3.000 MW.
Amasra B Coal Field in Zonguldak was transferred to Hema Industry Firm by Turkish Hardcoal Enterprises with a similar model in 2005.
Another area of activity within the scope of the privatization of the coal industry is related with the new lignite fields which were developed between the years 2005 and 2012. Of these, to produce electricity from approximately 1.8 billion tons of coal reserves in the Konya-Karapınar Basin, Slovak HBP, Istroenergo and Thai Singh Joint Venture Group have signed preliminary agreements with the Electricity Generation Company of Turkey. It is also observed that the Eskişehir-Alpu, Afyon-Dinar and Trakya Çerkezköy coal fields that were developed in recent years and considered to have important reserves are also attracting the interests of domestic or foreign investors.
As can be seen, the area of privatization of the coal industry is extremely active. There are not enough pages to convey the latest developments. But, if you ask what concretely appeared from all the actions so far, the answer does not exceed two lines for the present.
However, the effects of these actions are already possible to observe. The production capacity of the industry’s locomotive establishment, TKI, shrunk in half with the separation of the coal fields in Muğla and Seyitömer. The establishment will have to draw a new direction for itself in case of the privatization of the Soma Coal Basin with Soma A and B power plants which have been taken as a priority in the privatization program by the Privatization Administration.
A similar situation exists for the Electricity Generation Company of Turkey. Besides the Çayırhan Coal Field that has been operated by Park Group for a long time under the contract of transfer of operating rights, the Sivas-Kangal Coal Field was also transferred to the private sector in recent months. This company will be fully withdrawn from the coal industry that it had entered 25 years ago.
It can be said that the Turkish Hardcoal Enterprise’s position is slightly different from the other two organizations. Unlike the others, coal fields will not be privatized with the Çatalağzı Power Plant. However, the concern of Zonguldak is at the point of whether Çatalağzı Power Plant, which is buying almost 60% of the coal production of the Enterprise will continue to purchase after privatization. Losing its most important customer can probably mean the beginning of the end for the Enterprise, whose coal production has constantly been falling in recent years.
Looking at all these developments, it seems that Turkey’s coal industry is on the verge of a major transformation.
Ankara/December 2013