US embassy cable - 03ANKARA7180

UNCLAS SECTION 01 OF 02 ANKARA 007180 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB/CBED,EB/IFD, AND EUR/SE 
DEPARTMENT PASS OPIC AND EXIM, NSC FOR BRYZA, 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO 
USDOE FOR CHARLES WASHINGTON, TREASURY FOR OASIA 
 
 
E.O. 12958: N/A 
TAGS: EINV, ENRG, ECON, PREL, TU 
SUBJECT: DOGA ENERGY'S RESPONSE TO BOT PROBLEMS 
 
REF: A. ANKARA 7103 
     B. ANKARA 6696 
     C. ANKARA 6612 
     D. ANKARA 6423 
 
 
This cable is sensitive but unclassified, not for internet 
distribution. 
 
 
1.  (SBU) Summary. DOGA Energy sent a letter to us explaining 
how it has responded to speculative reports attributed to GOT 
sources about alleged corruption in the DOGA Energy BOT 
Project.  DOGA contends that the contracts were vetted and 
approved by the relevant GOT authorities.  The main source of 
the allegations is the State Inspection Board's (SIB) report 
to the President, which disputes the investment costs of the 
projects and the pricing structure for power generation. The 
documents were faxed to EUR/SE.  End Summary. 
 
 
2.  (SBU) DOGA Energy maintains that the BOT Project, which 
involves contracts for the 180 MW Esenyurt Natural Gas Power 
Plant, was established following length discussions with the 
Ministry of Energy, TEAS, BOTAS, SPO, and the 
Undersecretariat of Treasury.  The project was subsequently 
review by the Danistay and approved by the Council of 
Ministers. 
 
 
3.  (SBU) DOGA held a meeting with the State Accounting 
Bureau and explained with supporting documents that the 
allegations in the 2001 Report of the Supreme Council of 
State Accounts (Sayistay) were untrue. In addition, all the 
necessary information and documents were submitted to the 
Ministry of Energy's nine-member Inspection Team.  Despite 
these efforts, the State Inspection Board (SIB) repeated the 
same allegations in a recent Electricity Market report to the 
President of the Turkish Republic and to the Parliament. The 
allegations were published on the Presidential website and 
also obtained by the press.  DOGA argues that, although there 
are no supporting documents for the allegations, the report 
is making unjust accusation against its company. 
 
 
4.  (SBU) Like ENRON (reftels), DOGA is complaining about the 
number of unnecassary audits and investigations that are 
underway against the company.  According to DOGA,  Ministry 
of Finance inspectors have conducted the required audits on 
the accounts and transactions of DOGA Energy for 1998 to 
2001, but the audits are now being repeated for the same 
years due to the allegations in the SIB report.  DOGA notes 
that no irregularities or corruption will be found in the 
project. 
 
 
5.  (SBU) DOGA asserts that the allegations set forth in the 
SIB report are the result of misevaluation due to the lack of 
information.  Some of the allegations are listed below: 
 
 
-----Allegation 1: The contract was signed without a precise 
investment amount. 
DOGA's Response:  Both the implementation contract and its 
annex, the feasibility report state the investment amount 
clearly. The implementation contract was signed following the 
approval of the Feasibility Report of the Company's 
application that was submitted to the Ministry of Energy in 
accordance with Law no. 3096 and the decree was published in 
the Official Gazettee dated September 04, 1995 with number 
18858. 
 
 
-----Allegation 2: The Esenyurt Natural Gas Power Plant 
Project has applied repetitive escalation to its investment 
amount. 
DOGA's Response:  A high escalation ratio during the 
investment period is untrue.  BOT model is a financing model; 
the escalation ratio that was applied to this project during 
the investment period is even lower than the escalation ratio 
that is widely applied at the international level. 
 
 
-----Allegation 3: The SIB report claims that when the 
productivity increased (from 120 MW to 180 MW) due to a 
change in the type of power plant, the gas energy prices 
should have decreased. 
DOGA's Response: Gas prices were increased, which caused an 
additional payment to the state natural gas monopoly BOTAS. 
Moreover, neither the change (3 gas turbines instead of 2 gas 
turbines and capacity increase with one steam turbine) has 
increased the efficiency. 
 
 
6.  (SBU)  Comment: GOT officials have on several occasions 
suggested to us that the DOGA Energy BOT is somehow violating 
its contract.  Consequently, the GOT will pursue different 
action with DOGA than it is with other BOT projects, such as 
ENRON.  Given growing negative perceptions about Turkey's 
investment climate, we have warned the GOT that taking 
drastic actions against DOGA would be counterproductive and 
have urged officials to consider the rule of law and to treat 
DOGA openly and justly.  End Comment. 
DEUTSCH