DekaBank, Societé Générale banks raising €1.2bn to fund the IIisu Dam hydroelectric plant in Southeast Turkey. The three banks are acting as the foreign commercial banks for the export credit. Two Turkish banks Akbank and Garanti Bank are arranging the tied commercial credits. The decision to support the dam financing has attracted much debate, with many lobby groups and NGOs concerned about the impact the project will have on the local population and environment.
In March this year the German, Austrian and Swiss governments approved the issuing of an export credit guarantees for the project through their export credit agencies: Euler Hermes, OeKB and Serv. The project also involves a consortium of multi-national companies, including: Andritz / VA Tech Hydro (Austria), Alstom Hydro (Switzerland), Züblin (Germany), Colenco, Maggia & Stucky (Switzerland). The overall contract value is approximately €1.2bn, and taking into account the amount the Turkish government is intending to spend on project-related measures, such as the resettlement of the population in the region, the overall cost is estimated to be around €2bn.
This project will dam the Tigris about 65km upstream from the border with Syria and Iraq. It is expected that the six planned turbines and generators with generate more than 3,800GWh annually using water power. The dam is intended to fulfil one of the government’s key objectives, to reduce the country’s dependency on fossil fuels. Construction on the project began earlier this month following a ceremony held by prime minister Recep Tayyip Erdogan.
However, this ceremony was also marked by the overnight vigil held by some of the protesters, who believe the dam will have severe environmental impact on the surrounding area, including flooding the ancient city of Hasankeyf, damaging animal habitats and displacing local communities. In May this year a network of 17 international NGOs and watchdog campaigning groups known as BankTrack sent letters to major international banks outlining what they see as a number of failures of the project to meet international standards. However, Dekabank defends its decision to finance the dam: “Like the other foreign banks involved in the commercial credits we rely on the ECAs “position on environmental and social standards. Moreover, a whole set of measures has been taken or will be implemented to mitigate the environmental and social impacts of the project, for example resettlement action plans, archaeological relation, waste water treatment plants, flora and fauna relocation.”
Bank Austria similarly defended their decision and told GTR: “Ilisu will help to reduce the economic gap between Anatolia and the Western part of Turkey. The region is unable to offer its population anything, there is an inadequate water/wastewater/electricity supply and not enough jobs – inhabitants have been migrating from the area for years. The dam and power plant will contribute to the energy supply and reduce the dependence on fossil fuels, while providing renewable energy (for a similar amount of coal-generated electricity, Ilisu Dam and Hydroelectric power plant will prevent emissions of about 3mn tons of CO2 per year).”
A spokesperson from Bank Austria also underlined that having agreed to undertake guarantees; OeKB must ensure that the standards of the World Bank are adhered to during this project. “For this OeKB issued more than 150 terms of reference (TOR). After a thorough examination, BA-CA sees no reason to question this stance of the OeKB. Therefore, BA-CA has indeed become part of an international financing consortium for the Ilisu project,” the bank asserts.
To comply with World Bank standards, an environmental impact assessment (EIA) must be conducted before the project starts. An EIA was taken in 2005, but given the scale of the project, there is a need to continually assess a wide range of environment issues at different stages of the seven-year construction period.
According to Bank Austria, the project will also include an ‘income restoration programme “under which training and new employment opportunities will be provided. A further US$100mn is said to be put aside to preserve the ancient town of Hasankeyf.