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Turkey’s currency recently fell to record lows after an emerging market sell-off, and the country’s economy looks unlikely to grow, not the best environment to begin a multibillion dollar project, and likely the reason why Abu Dhabi National Energy Co. (TAQA) has postponed an investment decision, with the possibility of cancelling the project in the future.
In January TAQA agreed to work with the Turkish state-owned Electricity Generation Co. to develop a $12 billion energy project that would see the development of several power plants which would burn lignite coal, mined from the Afsin-Elbistan region in Turkey.
The Afsin-Elbistan region holds an estimated 4.4 billion tonnes of lignite coal, about 40% of the country’s entire reserves, and enough to supply 8,000MW capacity of power plants.
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The Afsin-Elbistan mine (EnerjiEnstitusu)
Investment in emerging markets such as Turkey has been hit hard, as companies fear a reduction in available cheap cash on the market as the US Federal Reserve plans to reduce its monthly bond-buying program. An industry source told Reuters that “what we have been picking up from them recently is that they are looking at an eventual pull out. This was such a large-scale project, whose future was very much dependent on market conditions.”
Another source explained that “it was never realistic to see this project as something that one company alone could carry out ...Now with the changing climate towards emerging markets and Turkey, investors question the return.”
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As a result of the poor economic conditions in Turkey, TAQA announced that it would defer its decision on the Afsin-Elbistan investment until next year.
Another possibility is that TAQA has decided to withdraw from the project for political reasons. Tayyip Erdogan, the Turkish Prime Minister, managed to annoy several Gulf Arab States after criticising the ousting of Egypt’s President Mohammed Morsi. Being 75% owned by the Abu Dhabi government, TAQA may be sending a political message of disapproval to Erdogan, although a company spokesman refused to state if the decisions had any political motives.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com