TAQA may shelve $12bn Turkey power project

Updated 27 August 2013

TAQA may shelve $12bn Turkey power project

ANKARA: Abu Dhabi National Energy Co. (TAQA) may shelve a $12 billion power project in Turkey amid a deteriorating economic outlook and increasingly difficult financing conditions, Turkish energy industry sources said.
The oil explorer and power supplier agreed in January with Turkey’s state-owned Electricity Generation Co. (EUAS) on a project to build several power plants using lignite coal reserves in Turkey’s Afsin-Elbistan region.
The project was already challenging, Turkish energy sources said, given the low quality of coal in the area.
But a recent emerging market sell-off that sent Turkey’s currency to record lows has dampened its growth outlook and the possibility of further capital outflows has concerned TAQA.
“What we have been picking up from them recently is that they are looking at an eventual pullout,” an energy industry source said. “This was such a large-scale project, whose future was very much dependent on market conditions.”
Appetite for emerging market investments has been hit by fears of higher global borrowing costs and a reduction in the flow of cheap cash as the US Federal Reserve prepares to rein in its monthly bond-buying program.
Turkey is particularly vulnerable, being heavily dependent on foreign inflows to finance its current account deficit, which is running at over 7 percent of national output.
“It was never realistic to see this project as something that one company alone could carry out ...Now with the changing climate toward emerging markets and Turkey, investors question the return,” one source said.
TAQA said it had decided to defer the investment decision in Afsin-Elbistan until 2014, citing “other spending priorities.”
A TAQA spokesman declined to comment on the potential cancelation of the project.
Turkey’s Afsin-Elbistan region holds about 4.4 billion tons of lignite, around 40 percent of Turkey’s total reserves, and could provide up to 8,000 megawatts of power production capacity in southeast Turkey, if the coal potential is fully exploited, according to the Turkish energy ministry.
Construction of the TAQA project was originally scheduled to start in mid-2013 and was aiming to create a combined power generation capacity of up to 7,000 megawatts.
Sources also cited tensions between Turkey and Gulf states as one potential reason behind the possible cancelation.
“Due to the very high investment cost, if the tensions in the region could have been eased, progress might have been possible,” another energy industry source said.
Turkish Prime Minister Tayyip Erdogan’s criticism of the ouster of Egypt’s President Muhammad Mursi — which Turkey deems a coup — has antagonized some Gulf states, which remain divided on the issue.
A spokesman at TAQA, 75-percent owned by the government of Abu Dhabi, declined to comment when asked if the delay could be linked to politics.
Turkey is keen to make the most of its own coal resources so it can reduce its dependence on imported natural gas. Lignite’s role in power generation is set to expand alongside rapid growth expected in electricity demand.
The country was looking to issue an international tender for the Afsin-Elbistan region, a Turkish energy official said, once TAQA formally pulls out of the project.

Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 50 sec ago

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.