. 3 (004M be Colby ex

APR 20 2000 eet | earner 8 nena” MADE DEVEL CONN
Jatnnoh, Roan
lickin bewer “Citect
Mr. Edwin M. Truman QCataha gt
Assistant Secretary for Intemational Affairs Nat
Department of the Treasury .
Washington, D.C. 20220 tea! gS

i, While the overall thrust of the foemal World Bank requirements fot energy sector
oa Takes postive i appeaes chat the Wood Bank has been plncmg seme ee
necesaey ar issuing any Dew sovensign guarantees on cacrgy frojece ea ene

2 i 5

2. World Bank insistence thar Turkey create a priority list of energy projects,

saga Potential picils are clear to us afer hobding conversations with a variety of Turkish
sn American business representatives, pivate and U.S. agency fcancing bodice and
representatives of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Energy and Natural Resoutces also share these concems.

sepuld welcome, through your good offices, the arrangement of a working-leve meetng
with relevant officals from the World Bank and involving Department of Commens
fepresentatives to ensure that these concems are to, and clarificanions received
from, Bank officials as Turkey moves forward with these important comunitments thee er
its overall economic development, ‘We would hope that such a meeting could be
4s soon as possible given the pending nature of the loan and the related
levelopments in Turkey.

SEN

. WOHd
PF ELRAGHTOZE ON/TOELL “IS/Z0zL1 00.6 °S (THA)
FF GUROGNTOZETON/ IN LT IS/Z0510 00.6 SUH seenmannad( os


P.02
13:48

ea hy > UNITED STATES DEPARTMENT OF COMMERCE
SQ

Invernational Trade Admini:
ASSISTANT GECRETARY FOR TRADE DEVELOPMENT

APR 20 200 Washington, D.C. 20230

D cima Rory ;
Lihin been Riker

Mx. Edwin M Troman Ca ditt
Assistant Secretary for Intemsetional Affairs Wide
Department of the T!

Washington, D.C. 20220 Nepna-

Dear, Assistant Secretary Truman: oa aaa ae t

7 wish to bring to your attention some significant concems in this Department over the

effecis that a a Word Bank Economic Reform Loan for Turkey may have on energy
projects in that Country. concems are two-

1. While the overall thrust of the formal World Bank requirements for enexgy sector
reforin is, we feel, positive, it appears that the World Bank has been placing strong pressure
ou Turkey to avoid issamg any new sovereign guarantees on energy projects that hrve been
necessary in the past to gain financing, We are concemed that immediate suspension of
further guarantees for power projects, however, could easily put at substantial risk the ability
for pending and new projects to go forward over the medium-term unt new market
condivions develop.

according to some reports, also has been accompanied by an emphasis that only the lowest
Cost electricity projects be prioritized. If true, dus development in turn would put at risk

Projects like hydro power facilities that tend to be costly in their initial phases yct contabute
substantially in other ways to Turkey's economic development, energy diversity and secusity.

These potential pirfalls are dear to us after holding conversations with a vatiety of Turkish
and American business representatives, private and U.S. agency financing bodies, and
Xepresentanves of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Enexgy and Natural Resources also share these concems.

T would welcome, through your good offices, the arrangement of a working-level meeting
with relevant officials from the Word Bank and igvolvmg Department of Commerce
fepresentatives to ensure that these concems sre expressed to, and carificanons received
from, Bank officals as Turkey moves forward with these important commitments that will
affect its overall economic development We would hope that such a meeting could be

nd as soon as possible given the pending nature of the loan and the related
jevelopments in Turkey.

PeeARNRAFE AIA ET rama td AN ee MN

7 00800000000029


MAY-24-2802 17:85 ICM 202 622 0237 P.12

FAX TRANSMISSION

ENERGY DIVISION

DEPARTMENT OF COMMERCE
Room 4056

Washington, D.C. 20230
Fax: (202) 482-0170

Date: May 2, 2000 ; Pages: 3 (Including this sheet)

From: Michael Beeman
Casplan/Turkey Energy Officer - DOC
Tel: (202) 482-3492

To: Malachy Nugent
Treasury Dept.
622-0037
Subject; Memo on Turkish Reforms

MESSAGE

Malachy,

Per our conversation, please see the attached memo. As | mentioned, things have
fransplred somewhat from the time this was written, but the basic ideas are the same.

Asthings are moving quickly In Turkey on decisions about energy projects, your attention
fo this matter as soon as possible would be greatly appreciated,

Please let me know If you have any further questlons/concerns.

Michael B.

00500000001764


. 3 (004M be Colby ex

APR 20 2000 eet | earner 8 nena” MADE DEVEL CONN
Jatnnoh, Roan
lickin bewer “Citect
Mr. Edwin M. Truman QCataha gt
Assistant Secretary for Intemational Affairs Nat
Department of the Treasury .
Washington, D.C. 20220 tea! gS

i, While the overall thrust of the foemal World Bank requirements fot energy sector
oa Takes postive i appeaes chat the Wood Bank has been plncmg seme ee
necesaey ar issuing any Dew sovensign guarantees on cacrgy frojece ea ene

2 i 5

2. World Bank insistence thar Turkey create a priority list of energy projects,

saga Potential picils are clear to us afer hobding conversations with a variety of Turkish
sn American business representatives, pivate and U.S. agency fcancing bodice and
representatives of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Energy and Natural Resoutces also share these concems.

sepuld welcome, through your good offices, the arrangement of a working-leve meetng
with relevant officals from the World Bank and involving Department of Commens
fepresentatives to ensure that these concems are to, and clarificanions received
from, Bank officials as Turkey moves forward with these important comunitments thee er
its overall economic development, ‘We would hope that such a meeting could be
4s soon as possible given the pending nature of the loan and the related
levelopments in Turkey.

SEN

. WOHd
PF ELRAGHTOZE ON/TOELL “IS/Z0zL1 00.6 °S (THA)
FF GUROGNTOZETON/ IN LT IS/Z0510 00.6 SUH seenmannad( os


asd PLUL

“so
T thank you for your kind consideration of this important matter.
Sincerely,
J. Copps
C 1 CIRNONNOTH ‘AN/TASIT Te/7sFT on GG tM) woud

00500000001752


Rao, Geetha

—

From:
Sent:
To:
Subject:

[Hi! Were you able to speak with Mr. Bajpai? Thanks again!]

Farah Naim [Farah_Naim@ita.doc.gov]
Tuesday, January 09, 2001 10:12 AM
Geetha. Rao@do.treas.gov

Ennore project-related article

NEW DELHI, Jan. 8 Business Line article:
Govt to pull the plug on power

guarantees

Balaji C. Mouli

Shaji Vikraman

‘THE Dabhol Power Company (DPC) crisis in
Maharashtra is in the process of scalping its
first ‘casualty’. The Government is planning
to reverse the plan to extend sovereign
guarantees for three power projects ~ the
3,960 MW Reliance-SEAP promoted Hirma
project, the 1,800 MW LNG-fired Ennore
project and the 2,000 MW Pipavav project.
According to Finance Ministry sources, the
Government has written to the three power
producers to consider the option of direct
sale to earmarked consumers in the
purchasing States and thereby obviating the
need for the former to accord sovereign
guarantees.

The Government has argued that the need
for guarantees in the first place is
necessitated on account of the financially
fragile monopsinic nature of the power
market - single buyer of power, namely, the
State electricity board.

Since the Electricity Bill 2000, which is to be
introduced in the Budget session of
Parliament, allows for direct sale of power to
consumers, the Centre has argued that the
developer can negotiate with the existing
State electricity board and enter into an
arrangement whereby future consumers are
earmarked.

Further, for legal endorsement of such an
arrangement, the State or Central Electricity
Regulatory Commission's approval can be
sought for entry of power generation

00500000002228


MAY-84-2203 17:85 Icm 222 622 0837 P.18

T thank you for your kind consideration of this important matter.

Sincerely,

J. Copps

eavee'd eth 2c9 282 “UNI 93S 1SS¢ SUSYL B2itt @Bde-Se-ede

00500000001762


09/00/00 10:44 FAA 202 452 0170 ENERGY DIVISION goo01

FAX TRANSMISSION

ENERGY DIVISION

DEPARTMENT OF COMMERCE
Room 4056

Washington, D.C. 20230
Fax: (202) 482-0170

Date: May 5, 2000 Pages: 3 (Including this sheet)

From: Michael Beeman
Casplan/Turkey Energy Officer - DOC
Tel: (202) 482-3492
Fax: (202) 482-0170

To: Elizabeth Stewart
MDB Office - US Treasury
fax: 622-2505
Subject: Turkey Projects
MESSAGE

Dear Elizabeth,

Per your request, please find attached ¢ ent version of the Ilst that we have of U.S.
company projects that are in Iimbo, This does not Include a couple of transfer of
operating rights (TOR) projects, however. | have marked the two that have nearly
compiered tell which would then bring the total U.S. export content down to

for pending projects. | would kindly ask that you keep this document
d ask others you might share It with to do the same) as the
about company Intentions on procurement.

Our conversation was most helpful. | look forward to following-up again with you
soon. In the meantime, please don't hesitate fo contact me should you have any
further questions/Issves.

Best regards,

00500000001742


MAY-@4-2000 17:85 Ic

202 622 0837 P.13

International Trade Administration

Mo
if P> UNITED STATES DEPARTMENT OF COMMERCE
\ vA Washington, OC. 20230
moma e

MEMORANDUM
TO: Denise Carpenter .
Office of Finance

FROM: Jim Wilson}.'7")
Director
Office of Energy, Infrastructure and Machinery

RE: Pending World Bank Structural Adjustment Loan for Turkey

The World Bank is set to approve a major $760 million structural adjustment loan for
Turkey in the coming weeks. Upon review of the World Bank recommendation to the
Executive Directors Board on this loan, we support the general thrust of the effort that
Turkey has pledged to undertake in the area of energy sector reform and privatization.
On the other hand, we have some serious concems about how the World Bank and the
Turkish Treasury appear to be planning to move forward with measures that will be
necessary to implement the loan that may negatively affect Turkey's ability to implement
major power projects over thc medium-term.

Investors traditionally have looked to the Turkish Treasury to provide guarantees for fuel
supply from and electricity sales to government-owned entities in order to satisfy the risks
that lenders to such projects are willing to accept. According to the language of the
World Bank recommendation, Turkey now is agreeing to put “limits on the issuance of
new guarantees.” Under a deregulated and privatized market, there exists an assumption
that a developed, market-based system for fuel supply and power purchases would be able
to lead to an environment when sovereign guarantees are no Jonger required in most
Cases.

While this may prove true, after recent consultations with officials of the Turkish
Treasury under the U.S.-Turkey Joint Economic Commission and with private
discussions with officials of the World Bank it appears that both sides are viewing rather
narrowly the scope for new guarantees -- in fact, possibly no further Treasury guarantees
for power projects.

This development is of great concer to us as well as to the Turkish Ministry of Energy
and Natural Resources. It will take some time for a market to develop that can support
fully market solutions to investment needs in Turkey. After discussions with
representatives of private banks and U.S. government finance agencies, we feel that

investment will be frozen for a matter of a few years should Turkey undertake such a ea Sy
ww g

00500000001765


JFiI-29-2081 13:48 P.@3

“

T thank you for your land considention of this important mattrc.
Sincerely,
J. Copps
CT ETeananarh au/IAs tt te smelt nA CC Eta) WON

00800000000030


MAY-84-2088 17:85 1cM 282 622 G37 P.@9

International Trade Administration
ASSISTANT SECRETARY FOR TASOE DEVELOPMENT

c% UNITED STATES DEPARTMENT OF COMMERCE
5,
SA

APR 20 2000 Weshington. 0.6, 20230
scrunch
Mr. Edwin M. Truman Cate
ee oe - International Affairs Gu ‘
epartment of the Treasury
Washington, D.C. 20220 N aad

Dear Assistant Secretary Truman: Gus p }

n

I wish to bring to your attention some significant concems in this Department over the
effects that a pending World Bank Economic Reform Loan for Turkey may have on energy
projects in that country. Our concerns are primarily two-fold.

1. While the overall thrust of the formal World Bank requirements for energy sector
reform is, we feel, positive, it appears that the World Bank has been placing strong pressure
on Turkey to avoid issuing any new sovereign guarantees on energy projects that have been
necessary in the past to gain financing. We are concerned that immediate suspension of
further guarantees for power projects, however, could easily put at substantial nsk the ability
for pending and new projects to go forward over the medium-term unt new market

conditions develop.

2. World Bank insistence that Turkey create a priority list of energy projects,
according to some reports, also has been accompanied by an emphasis that only the lowest
cost electricity projects be prioritized. If nue, this development in tum would put at risk
projects like hydro power facilities that tend to be costly in their inital phases yet contribute
substantially in other ways to Turkey's economic development, energy diversity and security.

These potential pitfalls are clear to us after holding conversations with 2 variety of Turkish
and American business representatives, private and U.S. agency financing bodies, and
representatives of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Energy and Natural Resources also share these concems.

I would welcome, through your good offices, the arrangement of a working-level mecting
with relevant officials from the World Bank and involving Department of Commerce
representatives to ensure that these concems are expressed to, and clarifications received
from, Bank officals as Turkey moves forward with these important commitments that will
affect its overall economic development. We would hope that such a meeting could be

as soon as possible given the pending nature of the loan and the related

pments in Turkey.

fB/T8'd etre 229 22 “UNI 33S 1SSe Sb3e1 42:TT BGBZ-S2~edd

00500000001761


asd PLUL

“so
T thank you for your kind consideration of this important matter.
Sincerely,
J. Copps
C 1 CIRNONNOTH ‘AN/TASIT Te/7sFT on GG tM) woud

00500000001752


FACSIMILE TRANSMITTAL

THE WORLD BANK
OFFICE OF THE U.S. EXECUTIVE DIRECTOR
1818 H Street, NW Room D-13-004
Washington, DC 20433

Date: = 5 } & } fate) NUMBER OF PAGES INCLUDING COVER SHEET: i

T Ehrabetl Slewarr
FAXNUMBER: (pAQ - SOS

FROM: Janice Mazur, Procurement Liaison
TEL: (202) 458-0118
FAX: (202) 477-2967

COMMENTS:
ger Telcon earke,
Progran fear Ieade. fev Tude, Ener, Wom Moose
he if oa Turks, now Cunt Ton arrow achual, J

he repels To Pll Thoneom who y Nsfed tn Pee.
Prac book as ail ok sas bit A Ra2daey
Scerelag Telle ne TheT on old Te.

ANONNO7h ‘AN/TA 10/7) nn WwW Wad
ON/TASTT IO/7021T CC fiw
1 oat 0 NI


MAY-24-2802 17:85 ICM 202 622 0237 P.12

FAX TRANSMISSION

ENERGY DIVISION

DEPARTMENT OF COMMERCE
Room 4056

Washington, D.C. 20230
Fax: (202) 482-0170

Date: May 2, 2000 ; Pages: 3 (Including this sheet)

From: Michael Beeman
Casplan/Turkey Energy Officer - DOC
Tel: (202) 482-3492

To: Malachy Nugent
Treasury Dept.
622-0037
Subject; Memo on Turkish Reforms

MESSAGE

Malachy,

Per our conversation, please see the attached memo. As | mentioned, things have
fransplred somewhat from the time this was written, but the basic ideas are the same.

Asthings are moving quickly In Turkey on decisions about energy projects, your attention
fo this matter as soon as possible would be greatly appreciated,

Please let me know If you have any further questlons/concerns.

Michael B.

00500000001764


MAY-@4-2000 17:85 Ic

202 622 0837 P.13

International Trade Administration

Mo
if P> UNITED STATES DEPARTMENT OF COMMERCE
\ vA Washington, OC. 20230
moma e

MEMORANDUM
TO: Denise Carpenter .
Office of Finance

FROM: Jim Wilson}.'7")
Director
Office of Energy, Infrastructure and Machinery

RE: Pending World Bank Structural Adjustment Loan for Turkey

The World Bank is set to approve a major $760 million structural adjustment loan for
Turkey in the coming weeks. Upon review of the World Bank recommendation to the
Executive Directors Board on this loan, we support the general thrust of the effort that
Turkey has pledged to undertake in the area of energy sector reform and privatization.
On the other hand, we have some serious concems about how the World Bank and the
Turkish Treasury appear to be planning to move forward with measures that will be
necessary to implement the loan that may negatively affect Turkey's ability to implement
major power projects over thc medium-term.

Investors traditionally have looked to the Turkish Treasury to provide guarantees for fuel
supply from and electricity sales to government-owned entities in order to satisfy the risks
that lenders to such projects are willing to accept. According to the language of the
World Bank recommendation, Turkey now is agreeing to put “limits on the issuance of
new guarantees.” Under a deregulated and privatized market, there exists an assumption
that a developed, market-based system for fuel supply and power purchases would be able
to lead to an environment when sovereign guarantees are no Jonger required in most
Cases.

While this may prove true, after recent consultations with officials of the Turkish
Treasury under the U.S.-Turkey Joint Economic Commission and with private
discussions with officials of the World Bank it appears that both sides are viewing rather
narrowly the scope for new guarantees -- in fact, possibly no further Treasury guarantees
for power projects.

This development is of great concer to us as well as to the Turkish Ministry of Energy
and Natural Resources. It will take some time for a market to develop that can support
fully market solutions to investment needs in Turkey. After discussions with
representatives of private banks and U.S. government finance agencies, we feel that

investment will be frozen for a matter of a few years should Turkey undertake such a ea Sy
ww g

00500000001765


Suggested U.S. Participants on the Environment 2 Panel
(U.S. Panel Contact: Peter Bowman)
(202) 482-8356

U.S. CO-CHAIR:
Environmental Protection Agency
Deputy Assistant Administrator
Dr. Alan Hecht

U.S. PROJECT PRESENTATIONS
Mr. Jerry Santillan, City Manager
Water Treatment Plant, Brawley, California: Construction of new water treatment
plant which will improve water quality and services, by providing a reliable source of
potable water. As an advisor and lead investor for the City of Brawley, NADBank has
worked with the community: developing an affordable project; beginning a credit rating
process; creating permanent reserves in the financial structure of the project aimed at
avoiding future maintenance and operations problems; participating in public rate
hearings; reviewing the project's first construction bids (30% over the original budget) as
well as helping the City restructure the second bids which were 20% below the original
budget. Construction is 100% complete.

OTHER U.S. PANELISTS
First Choice
El Paso Service Board
Mr. Ed Archuleta

Second Choice
Chemonics
Mr. David Lynn
Director of Infrastructure Finance with Chemonics

Alternate Second Choice

EA Engineering, Science and Technology
Mr. Don Deieso
CEO/President

Third Choice
Azurix, Enron Affiliate
Ms. Rebecca Mark
Chairman and CEO of Azurix, Enron subsidiary

Fourth Choice

00300000000079


Rao, Geetha

—

From:
Sent:
To:
Subject:

[Hi! Were you able to speak with Mr. Bajpai? Thanks again!]

Farah Naim [Farah_Naim@ita.doc.gov]
Tuesday, January 09, 2001 10:12 AM
Geetha. Rao@do.treas.gov

Ennore project-related article

NEW DELHI, Jan. 8 Business Line article:
Govt to pull the plug on power

guarantees

Balaji C. Mouli

Shaji Vikraman

‘THE Dabhol Power Company (DPC) crisis in
Maharashtra is in the process of scalping its
first ‘casualty’. The Government is planning
to reverse the plan to extend sovereign
guarantees for three power projects ~ the
3,960 MW Reliance-SEAP promoted Hirma
project, the 1,800 MW LNG-fired Ennore
project and the 2,000 MW Pipavav project.
According to Finance Ministry sources, the
Government has written to the three power
producers to consider the option of direct
sale to earmarked consumers in the
purchasing States and thereby obviating the
need for the former to accord sovereign
guarantees.

The Government has argued that the need
for guarantees in the first place is
necessitated on account of the financially
fragile monopsinic nature of the power
market - single buyer of power, namely, the
State electricity board.

Since the Electricity Bill 2000, which is to be
introduced in the Budget session of
Parliament, allows for direct sale of power to
consumers, the Centre has argued that the
developer can negotiate with the existing
State electricity board and enter into an
arrangement whereby future consumers are
earmarked.

Further, for legal endorsement of such an
arrangement, the State or Central Electricity
Regulatory Commission's approval can be
sought for entry of power generation

00500000002228


MAY-24-2828 17:85 ICM ae 622 2037 P.14

Draconian program on sovereign guarantecs. In essence, projects that currently under
development and in search of financing would be unable to go forward for a several
years, potentially damaging the ability of Turkey to have an adequate supply of power to
meet its expanding need for energy to fuel economic growth.

In addition, as made apparent by the letter from Mr. Onal, Turkish Minister of State for
Economic Affairs, to Mr. Wolfensohn, World Bank President, the Government of Turkey
will pursue prioritization of energy projects that are “lower cost.” We share a concern
with the Turkish Ministry of Energy and Natural Resources that an emphasis on “lower
cost” alone will deprive Turkey of important infrastructure projects, such as hydropower
plants or facilities that use indigenous coal sources, that may have higher tariffs over the
initial years but that have great longer term benefits to the economy, energy security, and
the environment. While this issue is a matter for the Government of Turkey to decide
how it will implement its reform program, the creation of priority list is a condition that
the World Bank has insisted on informally through the negotiation process over the loan.

I wish to share our concerns with you prior to the decision of the Executive Directors on
this loan program. While we have no objections to the language that the World Bank has
used regarding its requirements for Turkey’s receipt of this loan, we have strong concerns
with how the program will be implemented and that if not properly managed, could freeze
investment in many projects that Turkey has planned as necessary to meet growing
demand for power.

cc: Michael Copps
Alan Bowser

TOTAL P.14

00500000001766


MAY-84-2203 17:85 Icm 222 622 0837 P.18

T thank you for your kind consideration of this important matter.

Sincerely,

J. Copps

eavee'd eth 2c9 282 “UNI 93S 1SS¢ SUSYL B2itt @Bde-Se-ede

00500000001762


MAY-84-2088 17:85 1cM 282 622 G37 P.@9

International Trade Administration
ASSISTANT SECRETARY FOR TASOE DEVELOPMENT

c% UNITED STATES DEPARTMENT OF COMMERCE
5,
SA

APR 20 2000 Weshington. 0.6, 20230
scrunch
Mr. Edwin M. Truman Cate
ee oe - International Affairs Gu ‘
epartment of the Treasury
Washington, D.C. 20220 N aad

Dear Assistant Secretary Truman: Gus p }

n

I wish to bring to your attention some significant concems in this Department over the
effects that a pending World Bank Economic Reform Loan for Turkey may have on energy
projects in that country. Our concerns are primarily two-fold.

1. While the overall thrust of the formal World Bank requirements for energy sector
reform is, we feel, positive, it appears that the World Bank has been placing strong pressure
on Turkey to avoid issuing any new sovereign guarantees on energy projects that have been
necessary in the past to gain financing. We are concerned that immediate suspension of
further guarantees for power projects, however, could easily put at substantial nsk the ability
for pending and new projects to go forward over the medium-term unt new market

conditions develop.

2. World Bank insistence that Turkey create a priority list of energy projects,
according to some reports, also has been accompanied by an emphasis that only the lowest
cost electricity projects be prioritized. If nue, this development in tum would put at risk
projects like hydro power facilities that tend to be costly in their inital phases yet contribute
substantially in other ways to Turkey's economic development, energy diversity and security.

These potential pitfalls are clear to us after holding conversations with 2 variety of Turkish
and American business representatives, private and U.S. agency financing bodies, and
representatives of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Energy and Natural Resources also share these concems.

I would welcome, through your good offices, the arrangement of a working-level mecting
with relevant officials from the World Bank and involving Department of Commerce
representatives to ensure that these concems are expressed to, and clarifications received
from, Bank officals as Turkey moves forward with these important commitments that will
affect its overall economic development. We would hope that such a meeting could be

as soon as possible given the pending nature of the loan and the related

pments in Turkey.

fB/T8'd etre 229 22 “UNI 33S 1SSe Sb3e1 42:TT BGBZ-S2~edd

00500000001761


capacity into the state power sector. Since
the SERC will be verifying the cost of power
using economic principles, the States will be
contracting competitively-priced power.
The developers have asked the sponsors to
seek the views of the lenders to the

projects on such an arrangement.

The payment security mechanism earlier
proposed by the Government covered the
payment of outstanding foreign debt to the
developer in the event of termination of the
project owing to payment default by the
purchasing entities. To avert the possibility
of termination, the sponsors will be paid for
a period of six months following default by
the consumers.

The evolution of a payment security
mechanism for the three projects has a
come a full circle. The original concept
formulated over two years ago (during Prof
Alagh tenure) for sale of power from mega
power projects involved sale of power from
the mega projects to earmarked high tension
consumers.

This, however, did not take off since the
States did not accept the concept of

‘cherry picking’ of consumers whereby the
paying consumers to electricity boards will
secure the payment for the mega power
bills.

This is because the weaning away the
paying consumers in the earlier
non-reforming environment would lead to the
deterioration of the finances of the State
electricity boards, they argued.

At this point of time, the erstwhile Union
Power Minister Mr P.R. Kumaramangalam
mooted a revised structure involving
sovercign guarantees for covering debt
repayment in the event of termination of the
power project besides the comfort
mechanism to avert termination.

With the possibility of invoking of Central
guarantees by the Enron looming over the
Finance Ministry, the Government has
decided to revisit the need to accord
guarantees for the power projects.

00500000002229


FACSIMILE TRANSMITTAL

THE WORLD BANK
OFFICE OF THE U.S. EXECUTIVE DIRECTOR
1818 H Street, NW Room D-13-004
Washington, DC 20433

Date: = 5 } & } fate) NUMBER OF PAGES INCLUDING COVER SHEET: i

T Ehrabetl Slewarr
FAXNUMBER: (pAQ - SOS

FROM: Janice Mazur, Procurement Liaison
TEL: (202) 458-0118
FAX: (202) 477-2967

COMMENTS:
ger Telcon earke,
Progran fear Ieade. fev Tude, Ener, Wom Moose
he if oa Turks, now Cunt Ton arrow achual, J

he repels To Pll Thoneom who y Nsfed tn Pee.
Prac book as ail ok sas bit A Ra2daey
Scerelag Telle ne TheT on old Te.

ANONNO7h ‘AN/TA 10/7) nn WwW Wad
ON/TASTT IO/7021T CC fiw
1 oat 0 NI


JFiI-29-2081 13:48 P.@3

“

T thank you for your land considention of this important mattrc.
Sincerely,
J. Copps
CT ETeananarh au/IAs tt te smelt nA CC Eta) WON

00800000000030


Inter-American Development Bank
Moises Pineda, Executive Director of Mexico

Fifth Choice

Border Environment Cooperation Commission
Mr. Rene Franco, Project Development Director

00300000000080


09/00/00 10:44 FAA 202 452 0170 ENERGY DIVISION goo01

FAX TRANSMISSION

ENERGY DIVISION

DEPARTMENT OF COMMERCE
Room 4056

Washington, D.C. 20230
Fax: (202) 482-0170

Date: May 5, 2000 Pages: 3 (Including this sheet)

From: Michael Beeman
Casplan/Turkey Energy Officer - DOC
Tel: (202) 482-3492
Fax: (202) 482-0170

To: Elizabeth Stewart
MDB Office - US Treasury
fax: 622-2505
Subject: Turkey Projects
MESSAGE

Dear Elizabeth,

Per your request, please find attached ¢ ent version of the Ilst that we have of U.S.
company projects that are in Iimbo, This does not Include a couple of transfer of
operating rights (TOR) projects, however. | have marked the two that have nearly
compiered tell which would then bring the total U.S. export content down to

for pending projects. | would kindly ask that you keep this document
d ask others you might share It with to do the same) as the
about company Intentions on procurement.

Our conversation was most helpful. | look forward to following-up again with you
soon. In the meantime, please don't hesitate fo contact me should you have any
further questions/Issves.

Best regards,

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MAY-24-2828 17:85 ICM ae 622 2037 P.14

Draconian program on sovereign guarantecs. In essence, projects that currently under
development and in search of financing would be unable to go forward for a several
years, potentially damaging the ability of Turkey to have an adequate supply of power to
meet its expanding need for energy to fuel economic growth.

In addition, as made apparent by the letter from Mr. Onal, Turkish Minister of State for
Economic Affairs, to Mr. Wolfensohn, World Bank President, the Government of Turkey
will pursue prioritization of energy projects that are “lower cost.” We share a concern
with the Turkish Ministry of Energy and Natural Resources that an emphasis on “lower
cost” alone will deprive Turkey of important infrastructure projects, such as hydropower
plants or facilities that use indigenous coal sources, that may have higher tariffs over the
initial years but that have great longer term benefits to the economy, energy security, and
the environment. While this issue is a matter for the Government of Turkey to decide
how it will implement its reform program, the creation of priority list is a condition that
the World Bank has insisted on informally through the negotiation process over the loan.

I wish to share our concerns with you prior to the decision of the Executive Directors on
this loan program. While we have no objections to the language that the World Bank has
used regarding its requirements for Turkey’s receipt of this loan, we have strong concerns
with how the program will be implemented and that if not properly managed, could freeze
investment in many projects that Turkey has planned as necessary to meet growing
demand for power.

cc: Michael Copps
Alan Bowser

TOTAL P.14

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Inter-American Development Bank
Moises Pineda, Executive Director of Mexico

Fifth Choice

Border Environment Cooperation Commission
Mr. Rene Franco, Project Development Director

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P.02
13:48

ea hy > UNITED STATES DEPARTMENT OF COMMERCE
SQ

Invernational Trade Admini:
ASSISTANT GECRETARY FOR TRADE DEVELOPMENT

APR 20 200 Washington, D.C. 20230

D cima Rory ;
Lihin been Riker

Mx. Edwin M Troman Ca ditt
Assistant Secretary for Intemsetional Affairs Wide
Department of the T!

Washington, D.C. 20220 Nepna-

Dear, Assistant Secretary Truman: oa aaa ae t

7 wish to bring to your attention some significant concems in this Department over the

effecis that a a Word Bank Economic Reform Loan for Turkey may have on energy
projects in that Country. concems are two-

1. While the overall thrust of the formal World Bank requirements for enexgy sector
reforin is, we feel, positive, it appears that the World Bank has been placing strong pressure
ou Turkey to avoid issamg any new sovereign guarantees on energy projects that hrve been
necessary in the past to gain financing, We are concemed that immediate suspension of
further guarantees for power projects, however, could easily put at substantial risk the ability
for pending and new projects to go forward over the medium-term unt new market
condivions develop.

according to some reports, also has been accompanied by an emphasis that only the lowest
Cost electricity projects be prioritized. If true, dus development in turn would put at risk

Projects like hydro power facilities that tend to be costly in their initial phases yct contabute
substantially in other ways to Turkey's economic development, energy diversity and secusity.

These potential pirfalls are dear to us after holding conversations with a vatiety of Turkish
and American business representatives, private and U.S. agency financing bodies, and
Xepresentanves of Turkish and other U.S. agencies. Some of Turkey's energy planners in the
Ministry of Enexgy and Natural Resources also share these concems.

T would welcome, through your good offices, the arrangement of a working-level meeting
with relevant officials from the Word Bank and igvolvmg Department of Commerce
fepresentatives to ensure that these concems sre expressed to, and carificanons received
from, Bank officals as Turkey moves forward with these important commitments that will
affect its overall economic development We would hope that such a meeting could be

nd as soon as possible given the pending nature of the loan and the related
jevelopments in Turkey.

PeeARNRAFE AIA ET rama td AN ee MN

7 00800000000029


capacity into the state power sector. Since
the SERC will be verifying the cost of power
using economic principles, the States will be
contracting competitively-priced power.
The developers have asked the sponsors to
seek the views of the lenders to the

projects on such an arrangement.

The payment security mechanism earlier
proposed by the Government covered the
payment of outstanding foreign debt to the
developer in the event of termination of the
project owing to payment default by the
purchasing entities. To avert the possibility
of termination, the sponsors will be paid for
a period of six months following default by
the consumers.

The evolution of a payment security
mechanism for the three projects has a
come a full circle. The original concept
formulated over two years ago (during Prof
Alagh tenure) for sale of power from mega
power projects involved sale of power from
the mega projects to earmarked high tension
consumers.

This, however, did not take off since the
States did not accept the concept of

‘cherry picking’ of consumers whereby the
paying consumers to electricity boards will
secure the payment for the mega power
bills.

This is because the weaning away the
paying consumers in the earlier
non-reforming environment would lead to the
deterioration of the finances of the State
electricity boards, they argued.

At this point of time, the erstwhile Union
Power Minister Mr P.R. Kumaramangalam
mooted a revised structure involving
sovercign guarantees for covering debt
repayment in the event of termination of the
power project besides the comfort
mechanism to avert termination.

With the possibility of invoking of Central
guarantees by the Enron looming over the
Finance Ministry, the Government has
decided to revisit the need to accord
guarantees for the power projects.

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Suggested U.S. Participants on the Environment 2 Panel
(U.S. Panel Contact: Peter Bowman)
(202) 482-8356

U.S. CO-CHAIR:
Environmental Protection Agency
Deputy Assistant Administrator
Dr. Alan Hecht

U.S. PROJECT PRESENTATIONS
Mr. Jerry Santillan, City Manager
Water Treatment Plant, Brawley, California: Construction of new water treatment
plant which will improve water quality and services, by providing a reliable source of
potable water. As an advisor and lead investor for the City of Brawley, NADBank has
worked with the community: developing an affordable project; beginning a credit rating
process; creating permanent reserves in the financial structure of the project aimed at
avoiding future maintenance and operations problems; participating in public rate
hearings; reviewing the project's first construction bids (30% over the original budget) as
well as helping the City restructure the second bids which were 20% below the original
budget. Construction is 100% complete.

OTHER U.S. PANELISTS
First Choice
El Paso Service Board
Mr. Ed Archuleta

Second Choice
Chemonics
Mr. David Lynn
Director of Infrastructure Finance with Chemonics

Alternate Second Choice

EA Engineering, Science and Technology
Mr. Don Deieso
CEO/President

Third Choice
Azurix, Enron Affiliate
Ms. Rebecca Mark
Chairman and CEO of Azurix, Enron subsidiary

Fourth Choice

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