The turkish nuclear power industry from local investment to regional domination

Dynatom International Sàrl
Address：Route des Arsenaux 22, 1700 Fribourg, Switzerland
TEL：+41 (0)26 514 05 17 Http://www.dynatom.org
IDE: CHE-172.071.264

The Turkish Nuclear Power Industry:
From local investment to regional domination

The Turkish Nuclear Power Industry: ............................................................................................. 1
From local investment to regional domination ....................................................................................... 1
I. Executive Summary ......................................................................................................................... 2
Fig. 1: The eight forces in the Turkish Market ........................................................................................................ 4
II. Foreign and Domestic Enterprises face new blockages .................................................... 5
A. The Akkuyu project and its impact in the tenders ......................................................................... 5
B. The Akkuyu project and its impact in the Turkish Industry ....................................................... 5
C. The Initial Public Offering in 2016 ....................................................................................................... 5
D. Structure of the supply chain and hierarchy .................................................................................... 6
Fig. 2: The stakeholders in the Turkish Market ..................................................................................................... 7
III. Major Threats for Turkish companies ................................................................................... 8
A. Turkish enterprises confront several concerns .............................................................................. 8
B. Medium Size Enterprises are not persistent .................................................................................... 8
C. Cross Cultural issue ................................................................................................................................... 9
D. The Nuclear Industry Association of Turkey is just burgeoning ............................................... 9
E. The international industry has a limited knowledge on Turkish capabilities ..................... 9
Fig .3: The perception of the Turkish nuclear industry in the market ...................................................... 10
IV. Major opportunities for cluster candidates in 2016-2017 ........................................... 10
Fig. 4: The perception of the global leaders in nuclear by the Turkish Industry .................................. 11
A. The globalization of the Turkish industry ...................................................................................... 11
Fig. 5: Forecasts of new construction in Middle East and Africa ................................................................. 12
B. The credible expansion of Turkey ..................................................................................................... 13
Fig.7: Market presence between the four main airlines in Middle East and Africa ............................. 14
C. The current investment of foreign companies ............................................................................... 14
D. The creation of the Nuclear Industry Association of Turkey .................................................... 14
E. The short term opening for the Turkish industry ........................................................................ 15
Fig. 8: Estimated size of the global nuclear energy market in 2011 and 2030 (Billion TRY) ......... 16
Fig. 9: Social Perception of the major competitors ............................................................................................ 16
F. The actual needs and how to answer: ............................................................................................... 16
• Grasp the international codes and standards ......................................................................................................... 16

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I. Executive Summary

In 2003, the Science and Technology Upper Council of the Scientific and Technological Research
Council of Turkey (TÜBITAK) listed electricity generation through nuclear power plants as the
third highest priority of the country.
The Turkish Government believes that the potential exists for Turkish businesses to partner with
foreign companies in third countries in Africa, the Middle East and Asia in order to maximize
compatible commercial strengths, in particular in energy, mining and transport markets. The ISO
benefits from a positive and increasing commercial atmosphere to create a nuclear cluster and
organize a supply chain that reaches international standards.
Since 2014, Dynatom assessed a list of 150 Turkish companies, including 94 in Istanbul (and ISO
nuclear cluster), for their involvement in the nuclear power market. The consulting company
selected 131 criteria in five key streams: Standards, Overseas Presence, Brand Awareness, Web
Presence and Manifestation in Foreign exhibitions.
Before the creation at the end of 2015 of the Nuclear Industry Association of Turkey (NIATR)
there was no an active lobbying to promote the Turkish technology, the majority of the nuclear
power industrial supply chain remains in the European, North American and Asian markets that
control the reactor engineering.
This executive report from Dynatom International GmbH aims to demonstrate the opportunities
for the Turkish industry and to institute a profitable and long-term business for the Turkish nuclear
supply chain (also known as the Nuclear Cluster) within the Middle East, Central Asia and
African nuclear projects.
The meaning of profitable business must be seen from a Turkish perspective (15-20%
Margin). Turkish buyers do not understand yet the pricing and the level of the competition in this
market, but can use any negotiating tool available to lower the expansion of their foreign
competitors.
The meaning of long-term must be divided in two parts: the phase 2016-2023, and the phase
2023-2030.

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Up to 2023, the country will build a preponderance of Nuclear Power units with VVER and
ATMEA technologies.
From 2020-2030, the country will build several other units of VVER and Atmea technologies, and
other plants, including AP1000-CAP1400 proposal from the consortium Westinghouse-SPIC, and
establish the Turkish nuclear industry as a regional leader.
In this executive report, DYNATOM INTERNATIONAL will show its global vision of the
Turkish market and the elements of research to be used for the report on the opportunities for the
Turkish industry to partner directly with a selected key players in the foreign industry to overcome
the existing competitive European, Japanese, North American and Russian supply chains, and then
to sell directly to the utility EÜAŞ (Electricity Generation Co.).
We realize the Turkish nuclear market is influenced by other several business cultures, from
Russia, Japan, USA, China and France.
The Turkish business has the opportunity, with our expertise, to participate in specific segments of
the global nuclear industry. The ultimate target is to market Turkish products through a global
nuclear supply chain in Middle East, Central Asia and Africa.

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Fig. 1: The eight forces in the Turkish Market
These eight forces in the Turkish market represent barriers and opportunities, depending how the
nuclear cluster is prepared to face the (domestic and foreign) competition and market needs. Each
force must be matched, for example by an adjustment from the cluster, or a focal point on one
segment of the market, such as the GOST standard for Akkuyu project, focus in safety level 3
equipment, Regional domination with an international partner, or lobbying inside the government
with the newly created Nuclear Industry Association of Turkey (NIATR) and the participation in
the regional summit known as the INPPS.
These forces represents the new needs that Turkey will need to fulfill with partners from Europe
(including Russia), China, Japan, USA and Canada. The market is not closed because nobody can
match these forces altogether.

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II. Foreign and Domestic Enterprises face new blockages

A.The Akkuyu project and its impact in the tenders

Atomstroyexport is in charge of the project of Akkuyu. The company created Akkuyu Nuclear
JSC in Ankara, a subsidiary owned by the Rosatom overseas (79.2%), Atomstroyexport NIAEP
(1,9%), Rosenergoatom Concern OJSC (18,9%) and the Russian Government. The project is
based on BOO (Build Operating Own) model, which gives autonomy to the Russian side to decide
who can get involved in the tenders.
Since May 2015, Foreign and domestic entrants in the market must obtain the TAEK certification
to sign commercial agreement for safety related equipment. At the same time, new entrants
without purchase orders from Rosatom cannot get involved in the Akkuyu project.
As for the non-safety equipment, the market is not yet closed to foreign entities because
Rosenergoatom does not provide to the Turkish industry the specification for non-safety
equipment for VVER.
Only Cengiz Holding won a tender for the marine hydro-technic structure. Akkuyu Nuclear JSC
plans to use Turkish companies for the construction only.
The project cooperation between Russia and Turkey Covers a Range of NPP Related construction,
operation and infrastructure Issues but not manufacturing. Up to mid 2015, only Russian
enterprises are able to sell to Akkuyu; the onsite inspection was supposed to start at the beginning
of 2016 until the political confrontation during the crisis in Syria.

B.The Akkuyu project and its impact in the Turkish Industry
This project in Turkey includes 4 units AES-2006 Technology for an investment between 58-64
Billion TRY.
When the Turkish parliament voted the construction of nuclear power plants, any investor had the
duty to localize 60% of the project. Prior to the event of November 24, 2015 the Russian side
planed to localize a maximum of 30%.
The Ministry of Energy and the Ankara Chamber of Industry created in 2014 a competitive
nuclear cluster in Ankara based on a list of 36 companies. The first target is to manufacture non-
safety and safety equipment level 3 for Akkuyu plant.
The local industry does not get any support from the safety authority, the TAEK, which
Regulation Regarding Equipment Procurement Process and Approval of Manufacturers for
Nuclear Facilities does not aim to protect the domestic industry, but ensure the safety of the
project and finally faces a blockage from the Russian side.
C.The Initial Public Offering in 2016

Rosatom cannot finance the complete project in Turkey, partly due to the large investment of

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Rosatom in other markets, partly due to government policy to reduce its budget in nuclear and
defense. However the company announced in 2014 that 49% of the capital would be open to
public shareholding in 2016.
The government fears that Turkish investment will finance the procurement of Russian
technology, which results in a loss of income, experience and innovation for the domestic industry
that is being organized by several agencies under the leadership of the Ministry of Energy.
Since the regional crisis in Syria and the antagonism between Russia and Turkey, it is unlikely the
IPO will take place this year.

D.Structure of the supply chain and hierarchy

The Ministry of Energy with the support of the Chambers of Industry such as Istanbul Chamber of
Industry (ISO) and the Ankara Chamber of Industry (ASO) sets the supply chain for all nuclear
projects in Turkey.
The chambers of industry use professional associations, (i.e. POMSAD) to communicate the needs
from the government.
The Safety Authority (TAEK) is a creation of the Ministry of Energy, and follows the
recommendations from the nuclear engineering department from the universities (i.e. Hacettepe).

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Fig. 2: The stakeholders in the Turkish Market

In the nuclear power market, the ministry of Energy is at the center of the Turkish strategy.
The main objectives are as follow:
• To create a supply chain with the support of the chambers of industry.
• To foster the joint ventures with experienced foreign factories.
• To create a nuclear industry association as a think tank of the government.
Ministry
of
Energy
Universities
(i.e. ITU, HU)
Hacetteppe /
Istanbul TTM
•  In direct relation
with the Ministry of
Energy
Accreditation
Agency
TURKAK
Safety
Authority
TAEK TSE
TTSO
Chamber of
Industry (i.e.
ISO/ASO)
Manufacturers
Professional
Associations
(i.e.POMSAD)
Nuclear
Industry
Association
(NIATR)

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• To encourage the expansion of nuclear department in engineering universities.
• To create a safety authority from the research center TAEK.
• To organize the sole inspection organization that can support the local industry.
• To support the creation of nuclear department at the accreditation authority.

Nevertheless, the Ministry of energy is the main coordinator of the nuclear project; each
stakeholder is linked to each other in the market. For a new entrant, a significant investment in
public relation is required to grasp and integrate the various lobbying groups.
I.e. Turkak certifies TSE, which provides services to TAEK. The nuclear engineering department
of Hacettepe University directly advises TAEK.
The understanding of the business network unlocks the business opportunities to new entrants.

III. Major Threats for Turkish companies

A.Turkish enterprises confront several concerns

• The nuclear power market in Turkey is not focused on a standalone technology. Its configuration
is based on private enterprises mostly, which expect orders from Mitsubishi Heavy Industry,
Areva, EÜAŞ and do not benefit from a protective technological market, therefore leaves a
management unable to compete against foreign companies in PWR market.
• Most of the Turkish companies that expand overseas are privately owned. They unfortunately do
not participate to major nuclear exhibitions (except Çimtaş Boru and Siterm in Power Gen Europe
and Çiltuğ Isısan in Atomexpo Russia), moreover they remain uncertain to invest in nuclear
related equipment for PWR.
• Finally, according to IEA “Regional perspectives for nuclear energy” report in 2015, the main
challenge in developing nuclear power in the Middle East will be in setting up the needed nuclear
infrastructure and training, as well as the education of a highly skilled nuclear work force.

B. Medium Size Enterprises are not persistent

The SME, which have not yet supply to overseas plants, face a market with intense international
competition and a lack of knowledge of the local requirements, in particular codes and standards,
in Turkey and Middle East.
The absence of reactivity from new candidates is rapidly the cause of failure. The Turkish nuclear
power market is not promoted in overseas markets (except a small government booth in WNE
2014), and the withdrawal of ASO for WNE 2016 increases this apprehension to support overseas
expansion and cooperation.
Except for a limited number of participants mentioned earlier, our monitoring of more than 150
Turkish companies websites does not show any interest in the global nuclear power market.
Despite several reports from the Turkish government and trade agencies, and the visit on 28 of

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February of the President Recep Tayyip Erdoğan in West Africa, there is no strategy of
globalization from Turkey to expand in the Middle East and African nuclear power markets.
C. Cross Cultural issue

Because the Turkish industry is new to this activity, the foreign competitors have a competitive
advantage. However the strategic plan of the government to create a nuclear cluster cannot be
underestimate especially if we take into account the financial power from the privately owned
industry, the quality of the graduates, the expertise from the technicians, the education system, and
ultimately the excellent track record of Turkish factories in the European market, and construction
companies in Middle East and Africa.
D.The Nuclear Industry Association of Turkey is just burgeoning

The Nuclear Industry Association of Turkey (NIATR) has a few active (domestic) members.
In the business plan 2015-2016, it is clearly mentioned its duty to promote overseas the Turkish
nuclear industry:
“NIATR is an umbrella institution for Turkish companies to include NPP projects which are
planned to be made in the World, especially in the Middle East”.
However in the list of markets to prospects, except a project in Jordan, there is no mention of
prospection in the overall Middle East, Central Asia and African programs.
In contrary, foreign lobbying groups, such as the 260 members of the Nuclear Industry
Association of UK (NIAUK) as well as the 350 members of the Groupement Intersyndical de
l’Industrie Nucléaire (GIIN) from France, organize visits and participation to international events
every two months, including the INPPS summit on March 8-9.

E. The international industry has a limited knowledge on Turkish capabilities

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Fig .3: The perception of the Turkish nuclear industry in the market

This chart shows how the EPC perceive the Turkish’s technology and potential support. The
Turkish industry is scarcely known in major energy projects but in nuclear our survey indicates
the following trend:
The EPC do not perceive that Turkey can localize on the short term the manufacturing of safety
related equipment in order to participate to the domestic and regional expansion in Africa and
Middle East.
As per example, the main problem in Akkuyu plant is the lack of understanding of the Russian
codes and standards, and the foreign industry does not see how Turkish companies can support the
market.
The positive facts are associated to the industrial organization and overseas expansion; the
interviewees agree that Turkey achieved significant results in the manufacturing of construction
equipment in Middle East, Russia and Africa.

IV. Major opportunities for cluster candidates in 2016-2017

The nuclear power market in Turkey is puzzled, because not one person knows who is really in
charge. Therefore the leading corporations with nuclear experience willing to share, join or
acquire a local company will benefit from the ongoing projects in Akkuyu and Sinop. The Akkuyu
project was a springboard for the Sinop plant and other projects planed by the government. The
recent political tension between Russia and Turkey over the bombing in Syria may impact the
speed of Akkuyu project. The industry believes that Sinop plant will be accelerated; therefore the
local industry should increase its investment in the ATMEA standard (Japanese ASME and
French RCC-M).
0
1
2
3
4
5
Localization Industrial
Organization
Training Manufacturing Codes and
Standards
Overseas
Expansion
Turkey

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Below is a study completed within the 150 companies assessed by Dynatom regarding the type
of ideal partner to get into the nuclear power market.

Fig. 4: The perception of the global leaders in nuclear by the Turkish Industry
This assessment is based on the presence of foreign companies in Turkey. It is not based on the
actual know-how / capabilities in the home country. The assessment reflects the needs of the
Turkish market and how each major country will answer to the necessities.

A. The globalization of the Turkish industry

Beside China, and India, which both are highly protectionist, there are no large (emerging)
countries with nuclear ambitions. However at the regional level, Africa and Middle East represent
by far the largest investment for the nuclear industry. According to IAEA, World Nuclear, IEA
and OCDE there are more than 55 new reactors that will be built in Middle East and Africa
between 2016-2030, and even more entrants (such as Burkina Faso) in the period 2030-2040.
0
1
2
3
4
5
6
Foreign nuclear equipment
manufacturers perceived in Turkey
Russia Japan France USA China Germany Canada

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Fig. 5: Forecasts of new construction in Middle East and Africa

This new market is for the Turkish government a strategic move to create the nuclear cluster,
based on 200 companies split between the 8 major industrial cities, to conquer their neighboring
countries.
The main programs developed in Turkey: VVER, ATMEA, AP1000 / CAP1400 are more or less
the same technologies that will be used in Middle East and Africa. For example, Rosatom is also
involved in Egypt, Jordan, Armenia, Nigeria, South Africa and Ghana.
To export equipment to these country will be costly for the foreign manufacturers, and we already
face some European companies looking to localize non-safety equipment with Turkish companies
for the regional market, in particular for heavy equipment such as pressure vessels and tanks (STF
from Italy with Kurtul Makina in 2015).
The main reason European competitors are investing in Turkey is not only based on the education
and the pricing, but mostly due to the legal system (the civil law is based on Swiss law, the
commercial law is based on Swiss and German laws), the evidence that no other country can
protect as well the intellectual property and no other government can guarantee an increasing
quality of the industry.

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B.The credible expansion of Turkey

One way to measure the regional development of Turkey is to assess the growing activities of
Turkish Airlines. The number of destinations defines the places where business is being oriented.
For example, during the recent visit of President Erdoğan in Ivory Coast, an agreement to increase
weekly flights from 4 to 7 between Ankara and Abidjan was signed.

Fig.6: Presence of the main regional Airlines in Middles East and Africa

Taking into account the four major competitors in this region, Turkey accounts for a third of the
market share for Middle East and Africa. The country plants to become the major European hub to
Africa and its recent advertising campaigns positioned the airline as the exclusive doorstep to
Africa.

0
5
10
15
20
25
30
Turkish Airlines Emirates Qatar Airways Etihad
Africa Middle East

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Fig.7: Market presence between the four main airlines in Middle East and Africa

This proactive expansion will benefit to foreign partners that often do not understand the
sensitivities in each African and Middle Eastern countries and tend to generalize the business
approach.

C.The current investment of foreign companies

The main development of foreign companies can be seen in mining, and defense.
For example Canadian investments in Turkey were valued at about $909-million in 2012 and
Export Development Canada has identified the country as a strategic market. According to EDC’s
website, “niche opportunities exist for Turkish investors, particularly in the energy, information
and communication technologies, mining, education and infrastructure sectors.”
Turkey needs “innovative engineering as well as financing solutions” to support infrastructure
development plans for the next 10 years, valued at approximately $400-billion, according to
CABC’s website. Inmet Mining Corp., Quantec Geoscience and Sherwood Innovations are among
the members of the Canadian-Turkish Business Council.
D.The creation of the Nuclear Industry Association of Turkey

The idea of the NIATR was originally envisioned by the Swiss company Dynatom International,
with the support of the organizer of the Istanbul Nuclear Power Plants Summit and the B2B
Turkish Airlines
32%
Emirates
26%
Qatar Airways
22%
Etihad
20%

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Matchmaking society.
Among its responsibilities, the main targets of the association are to:
• Train the local industry
• Craft B2B matchmaking between foreign and local companies
• Create a supply chain of Turkish and Foreign companies
• Prospect Middle East and Africa
• Take the leadership of the equipment and service supply to overseas nuclear power plants
in these regions.

The NIATR received the full support from the Ministry of Energy, which integrates the board of
management, and decided to open its structure to any company, wherever is the location in order
to share the common vision of regional domination.

E.The short term opening for the Turkish industry

According to the Nuclear Energy Institute, “Construction of nuclear plants creates a range of
Export opportunities. Depending on the design, a single new reactor requires approximately: 500
to 3,000 nuclear grade valves, 125 to 250 pumps, 70 kilometer of piping
483 kilometers of electric wiring, and 90,000 electrical components.”
The cluster should first join industry leaders in reactor design (Areva, CNPE, SNERDI, AECL,
Westinghouse…), engineering (Fluor, Amec, Tecnicas Reunidas…), construction and
procurement to learn how to become part of this growing dynamic market.
The best time to build relationships with key players in the nuclear industry — utilities, designers,
manufacturers and others — is when a new supply chain is forming. Once relationships have
solidified, it is much harder to break into that chain. So taking the time, effort and resources to
build relationships now is a strategic and inexpensive way to enter or expand a role in the nuclear
marketplace before it ramps up production.
0 100 200 300 400 500 600 700 800 900 1000
back end fuel cycle
front end fuel cycle
service
nuclear power plant construction
radiation management
nuclear generation
2030 2011

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Fig. 8: Estimated size of the global nuclear energy market in 2011 and 2030 (Billion TRY)

Fig. 9: Social Perception of the major competitors

The risk free access to the global market is to answer to immediate needs, integrate the local
nuclear industry associations and join the supply chain in neighboring’s markets.
F. The actual needs and how to answer:

Atomstroyexport and the company Akkuyu JSC do not provide enough support and specification
to increase the market share of the local companies.
Turkish suppliers who partner with foreign experts may have a competitive advantage and will be
able to:
• Grasp the international codes and standards
• Create their supply chain and distribution network
• Position their expertise and sell a service required
0
1
2
3
4
5
Quality
Relationship
Cultural Approach
Branding Creativity
Proactivity
Price
Japan France USA Canada Germany

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• Adapt their products to the next nuclear power plants
• Establish their presence for the second (MHI-Areva) and third project (SPIC- WEC) and
expand their sales network
• Increase their influence in the Middle East and African Region thanks to the commercial
network

The turkish nuclear power industry from local investment to regional domination

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