US embassy cable - 03ANKARA2953

C O N F I D E N T I A L ANKARA 002953 
 
SIPDIS 
 
 
STATE FOR E, EB/CBED, EB/IFD, EB/ESC AND EUR/SE 
DEPARTMENT PASS OPIC FOR ZAHNISER, MAHAFFEY 
NSC FOR BRYZA AND QUANRUD 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO 
USDOC FOR 6110/TD/BI/OEIM/MBEEMAN 
USDOE FOR PUMPHREY/ROSSI 
TREASURY FOR OASIA 
 
 
E.O. 12958: DECL: 05/07/2013 
TAGS: EINV, ENRG, ECON, PREL, TU 
SUBJECT: UPDATE ON BOT COMPANIES IN TURKEY 
 
REF: A) ANKARA 1390 B) ANKARA 416 C) ANKARA 8594 ,02 
 
 
Classified by Econ Couns Scot Marciel for reasons 1.5 (b,d) 
 
 
1. (C) Summary:  Energy Minister Guler is continuing to 
pressure the BOT projects to cut their electricity tariffs, 
threatening parliamentary investigations or legal troubles if 
they do not.  The BOTs, which include U.S.-owned companies 
Trakya Elektrik (Enron) and Doga Enerji (Edison Mission), 
have informed the Minister in writing that they are not 
prepared to change the terms of their contracts with the 
Ministry of Energy (MENR).  We have raised this issue with 
senior GOT officials in recent weeks -- and many times over 
the last several months -- with no progress.  Although we 
recognize the GOT,s right to try to renegotiate the BOT 
contracts, we oppose any effort to force contractual changes. 
 We recommend that the OPIC/ExIm delegation, which will meet 
with GOT officials May 14-16 in Ankara, focus on getting the 
government to back off from its threats and approach the 
companies with an eye toward compromise.  End summary. 
 
 
2. (C) Minister of Energy Guler called in the BOT projects 
again on April 10, including U.S.-owned companies Trakya 
Elektrik (Enron) and Doga Enerji (Edison Mission), and 
U.K.-Japanese owned Uni-Mar.  This meeting was a follow-on to 
the February 6 meeting, during which the Minister first asked 
the companies to cut their electricity prices (ref A). 
According to company representatives, the Minister was even 
more aggressive at the April meeting, threatening 
parliamentary investigations or legal proceedings for 
"fraudulent" contracts if the companies did not lower their 
tariffs.  We understands that Doga, Trakya, and Uni-Mar have 
all responded to the Minister in writing, informing him that 
they would not be able to comply with his request and they 
could not change the terms of their contract; however, 
company reps have told us off the record they would be more 
inclined to negotiate if the "gun was removed from their 
head." 
 
 
3. (C) We have raised this issue in recent weeks in meetings 
with senior GOT officials.  The Prime Minister's Chief 
Advisor,  Ahmet Davutoglu, told the DCM he was not familiar 
with the problem and asked for a backgrounder on the issue 
(which we subsequently provided).  Davutoglu added that, from 
his uninformed perspective, it seemed that contracts were 
contracts and any changes must be mutually agreed.  The new 
Energy Undersecretary Sami Demirbilek told Econ Couns that 
the Energy Ministry wanted to approach the problem in a way 
that did not hurt Turkey's foreign investment climate; 
however, he said, he believed the companies needed to make 
some "adjustments" based on the current realities in Turkey. 
 
 
4. (C) President of the Energy Market Regulatory Authority 
(EMRA) Yusuf Gunay told Econ Couns that Energy Minister had 
committed publicly to cutting electricity prices -- even 
though setting price's was EMRA's responsibility -- and 
consequently felt he needed to force the BOTs to cut their 
tariffs.  Gunay, who clearly felt uncomfortable with the 
Minister's approach with the companies, advised Econ Couns 
that Minister Guler was the driving force on this issue, and 
would be the key to resolving it. 
 
 
5. (C) Comment:  Although we recognize the GOT,s right to 
try to renegotiate the BOT contracts, we oppose any effort to 
force contractual changes.  Post understands OPIC and ExIm 
officials will raise this issue with the GOT in May 14-16 
meetings in Ankara.  We recommend that the delegation focus 
on getting the government to back off from its threats and 
approach the companies with an eye toward compromise.  End 
comment. 
PEARSON