Italian-Turkish geothermal energy-deal 'risky-business'

The recently negotiated agreement between Italian Enel Green Power and Turkish Uzun Group represents a vital step for Turkish geothermal investment, though pessimists have expressed concerns about “risky licenses.”The agreement covers more than 140 licenses, with critics pointing to risks of “unsubstantiated reserves” found in the absolutely major of the recently purchased geothermal sites.“Over 3,200 geothermal exploration licenses have been delivered, but only about 300 of them are worth something, and the sheer majority of those are low-grade resources that could not be used for power generation,” said Ümran Serpen, professor at Istanbul Technical University.“There are so many of those worthless licenses and you find people who are eager to market them and a few have made handsome profits by simply marketing a few licenses,” he told the Daily News. "I will not say that somebody is cheating Enel, but it's a risky business, and we'll see the results.”The new agreement on the exploration of geothermal sites in western Turkey was confirmed Jan. 24 between Italian energy giant Enel and Turkish Meteor, with support from the government, which plans to increase its geothermal capacity from 86 MW to 600 MW by 2015.The agreement promises the establishment of a research and exploration company in partnership with Meteor, a company that is 70 percent owned by Uzun and 30 percent by the G-Energy consultancy.The main objective will include carrying out surface and deep exploration activities with the aim of finding geothermal resources suitable for the generation of electricity and heat.The deal has promoted both confidence about Turkey’s geothermal potential with academics expressing confidence in Enel’s capabilities, while experts express concerns about extraction possibilities, based on fears of a lack of experience, unreliable consultants and monopolized sites.One of the main problems appears to be that consultants with limited specialization in energy and geothermal business have been consulting companies on sites and viability, according to Serpen.“They are planning a joint venture with some companies that are not known in the geothermal sector and not even in energy sector,” Serpen told the Daily News in an interview. “As for the lucrative licenses, they are already well known and owned by state-actors.”Other actors have expressed more optimism about the agreement, which could provide the foundation for a breakthrough in geothermal energy production across Europe and in Turkey.“Enel has decades of experience and is unlikely to take an interest in a site unless it had strong potential,” said Roland N. Horne, professor of energy resource engineering at Stanford University.“They were the first commercial developers of geothermal electricity in the world and have been generating from sources in Italy for many decades, while also expanding abroad during the past 15 years,” he told the Daily News.With a strong presence in Tuscany, Enel’s geothermal production is considered one of the oldest and largest in the world with 32 plants and a net capacity of 730MW, generating approximately 5 billion KW every year.The company has already successfully operated in the Unites States on geothermal sites, where they operate a 65MW binary cycle plant in Nevada.[HH] New energy laws, limited impactsNew Turkish laws from 2007 and 2010 were an attempt at creating a system of incentives for the production of renewable energy, through methods like a 10-year incentive plan, but have generally attracted little Turkish investment due to “underground risks” and the monopolization by the state of most “profitable licenses.”“The number of interested people in bids has decreased since the first law, because very high prices have been paid for the licenses in the bidding, which may have affected the feasibilities,” said Serpen.“There are also major underground risks and interest seems to be dying as not many seem to be buying,” he told the Daily News.The few positive aspects were tied to the fact that the electric selling tariffs may have increased the interests a bit as a consequence of the 2010 energy law promoted by government, according to experts.“It’s not common that worthless licenses are sold, but it depends on the specific laws and licensing procedures in the country,” said Philippe Dumas, manager of the European Geothermal Energy Council, during an interview with Daily News.

Turkey's EnerjiSA announces second wind plant supplier

Turkey's EnerjiSA, an energy group in Sabancı Holding, has announced an agreement with Siemens for the supply of turbine and electricity equipment for its second wind plant project in the Mediterranean province of Mersin, the Dağpazarı Wind Plant.The plant, to be established in the Mut district of the province, will generate around 129 megawatts electricity annually with 13 wind turbines each having 3 megawatts power generation capacity.On average, 1 MW of power can supply electricity to as many as 300 households per year.Selahattin Hakman, Sabancı Holding energy group chairman, said that Enerjisa has accelerated its activities targeting increasing and diversifying its portfolio, and for 2015 the company aims for 5-10 percent of its total established power, which they targeted to increase to 5,000 megawatts by 2015, would be supplied by wind power plants.“We are beginning the construction of our second wind power facility on April and the Dağpazarı Wind Power Plant will begin to generate electricity in 2012.”Enerjisa opened a wind power plant in Turkey's northwestern province of Çanakkale in late February together with its partner Verbund.The 90-megawatt plant is the first of a series of wind turbines EnerjiSA is set to launch in 2011, Sabanci CEO Güler Sabancı told reporters at the time.

Turkey's Sabancı launches wind-turbine facility with Verbund

Turkey's EnerjiSA, an energy group in Sabancı Holding, and its partner company Verbund on Saturday inaugurated a wind power plant in Turkey's northwestern province of Çanakkale.The 90-megawatt plant is the first of a series of wind turbines EnerjiSA is set to launch in 2011, Sabanci CEO Güler Sabancı told reporters."We are targeting to achieve 300 megawatts in wind power and soon we will launch a 100-150 megawatt project. We have confidence in Turkey's competitive energy market," Sabancı said.Austrian Verbund's CEO Johann Sereinig said the Verbund-Sabancı partnership had made the biggest amount of investment in Turkey with over 2.4 billion euros."Such powerful investments can not be made if it was not for Turkey's perfect opportunities for investment," he said.

Armani apartments in Istanbul attracting the wealthy

Wealthy Turks and foreigners drawn to the idea of living in homes whose interiors are designed by Giorgio Armani have been lining up to pre-buy apartments in Istanbul’s exclusive Maçka neighborhood.

“Seventy percent of the apartments have already been sold. The other 30 percent will be sold by the end of the year,” said Vedat Aşçı, chairman of the Astaş Real Estate Investment and Tourism Incorporation, which is constructing the project in conjunction with Armani/Casa, interior design line of the Armani brand.

The project, “Maçka Residences, Interior Design by Armani/Casa,” is focusing on high-end and exclusive real estate residences.

The project was launched in May and is attracting keen interest from the wealthiest elements of society, desperate to live in a house designed by Armani.

Some 70 percent of the “Maçka Residences Interior Design by Armani/Casa” project has already been sold, with apartment prices varying between $800,000 and $6.5 million.

The project, to be completed by April 2012, will cost a total of $400 million, according to Aşçı.

The project consists of three buildings rising over the last empty land of Maçka, which sold four years ago for $40 million. Aşçı began the project in cooperation with Kempinski, one of the world’s largest hotels and residences group.

Armani, attracted by the historical fabric of the Maçka district, has accepted the invitation to join the project, Aşçı said.

Armani/Casa will add the Istanbul project to a list of already-completed residence projects in cities such as Tokyo, Dubai, Rome and New York.

Penthouses for $6.5 million

The overall project value of the new residences is $400 million, Aşçı said. Apartments will be delivered to customers by April 2012, he said.

The cost of residences will vary from between $10,000 and $16,000 per square meter, Aşçı said. “There are a total of 170 apartments and 28 penthouses in the project. We have sold 25 of a total 28 penthouses, priced up to $6.5 million in the last three months.”

Interest from the UK and Arabic countries

Foreigners have been particularly interested in the project, Aşçı said, adding that people from the United Kingdom and the Arab world will also join Turks in the Maçka Residences.

The sizes of the one-room apartments begin at 77 square meters and expand to 140, 200, 230, 260, 400 and 500 square meters.

“Our targeted group is the upper level of society. We appeal to people who love this area of Istanbul and who have lived in waterside houses before. People who will stay in these residences will have seven-star comfort,” Aşçı said.

“People buy these houses to live here, not as investments,” Aşçı said. “However, when the project is completed, the values of the properties will double. For this reason, there are some people who will buy two houses, one to live in and the other as an investment.”

Armani design attracts

The greatest reason to buy a house at the Maçka Residences is the Armani signature, Aşçı said.

People have been wearing Armani-branded clothes and bags for sometime now, Aşçı said. “Armani will create four different interior designs and the customers will be able to choose one of them.”

The price of an Armani/Casa design is two times more than the price of an apartment, Aşçı said, adding an Armani design covering one square meter costs 2,500 euros. “We attach a great importance to quality.”

“The opening of the Maçka Residences will be celebrated with a party attended by Giorgio Armani,” Aşçı said.

A total of 600 people are currently working on the project, Aşçı said. “However, this figure will increase to nearly 1,500 or 2,000 people in the future.”

When the project is completed the premises will accommodate a spa, fitness facilities, shops and restaurants. The residences will also have exclusive services such as concierge, valet parking and exclusive transportation facilities.

From the Bosphorus: Straight - Caution warranted on ‘housing bubble’

As the old adage says, “If something appears too good to be true, it probably is.” We are optimistic by nature. But prudence still suggests caution.

Which is why we react with caution to the recent and much-touted report by the Global Property Guide that Turkey is the “most attractive property market” in Europe. The report gushes that foreigners can not only sweep up deals in Turkey, but can also benefit from Turkish bank loans.

Yes, Turkey is “under-leveraged” in terms relative to more mature markets. Yes, housing credits in Turkey, at roughly 5 percent of GDP, are far lower than in fully developed economies where they typically run to 100 percent or more of GDP. Perhaps we really are in the sweetest housing and real estate market in the world. The spate of building, the skylines dotted with construction cranes and the advertising for new housing developments certainly support such optimism.

But caution should reign. Thus we think the Banking Regulation and Supervision Agency, or BRSA, made the right decision last week when it put a brake on loans. As of Jan. 1, housing loans from banks will not be allowed to exceed 75 percent of the value of property being purchased. In the case of commercial real estate, this cap is set at 50 percent. BRSA is mulling further measures, including cuts in tax incentives to real estate investment trusts, which dominate large apartment complex construction.

We also note the warning last Friday from the IMF that rapid growth of housing loans poses a risk if “left unchecked.” Turkey’s overall growth this year is expected to be in the range of 8 percent. But housing credits are expected to have risen over the same time by 28 percent.

It is worth remembering that before the world economy effectively imploded in 2007 over a housing bubble in the United States, the U.S. real estate market was full of enthusiastic buyers, sellers and lenders. Now we know better.

It is worth remembering that Spain, the largest of Europe’s deeply troubled economies, is staring at economic wreckage largely blamed on an overheated real estate market. The country’s banking sector has $240 billion in “problematic exposure” out of a total of $580 billion invested in housing and real estate development.

The president of one real estate developers association, Turgay Taneş, may be correct that the sector needs and can sustain further development. And he may also be correct that curtailment of the boom in construction will ultimately harm consumers. Maybe.

But we think the more serious threat to Turkish consumers is a return of the “boom-and-bust” cycles that have characterized Turkey’s economy over the past half century. It may be that the near-miraculous rise of Turkey’s housing sector is a sure thing. But let’s make sure. The caution of BRSA and the IMF is worthy of emulation elsewhere among government regulators.

Turkish-style green certificate to be launched

Energy-hungry Turkey is eager to adopt green building certificates, but the existing international options might not be suitable for the country’s specific conditions, an expert warns. The Environment-Friendly Green Buildings Association is working on creating a Turkey-specific certificate based on the global BREEAM certificate

Sensitivity concerning green buildings in Turkey has increased, encouraging the country to produce its own certificate.

A top executive of the Environment-Friendly Green Buildings Association, or ÇEDBİK, said each country differs by its climate, geography, energy consumption and cultural structure. The association is working to produce a green building certificate suited for Turkey, as it thinks efficiency of global certificates such as BEES, LEED, BREEAM and CASBEE may be limited.

ÇEDBİK, which began studies in October using the British-based Building Research Establishment Environmental Assessment Method, or BREEAM, as an example, aims to prepare Turkey’s own green building certificate within three years.

“The existing certificates in their current conditions can affect Turkey’s construction sector only at minimum levels,” said Duygu Erten, vice chairwoman of ÇEDBİK. “Besides, there are some differences between [current] green building certificates. For this reason, the most appropriate one for Turkey should be chosen. We will take BREEAM as a model, since it is similar to European Union standards.”

BREEAM, a system that measures sustainability of new non-domestic buildings, implements a rating system to certify buildings as passing, good, very good, perfect and top-of-the-line. Until now, some 116 buildings have been certificated among 714 registered buildings.

BREEAM is attempting to adapt its circumstances in the energy industry to European Union’s Energy Performance Certificate, or EPC, Erten said.

Abundance of abbreviations

The most common green building certificates all over the world are the BEES, BREEAM, CASBEE, ECO-QUANTUM, ECOPROFILE, GBC, GREENSTAR, LCAid, LEED and SBtool certificates. These certificates have a large area of use, from cold climates of North America to the Mediterranean countries experiencing four seasons in one year. Many of the countries generate a special model by making some arrangements on a given certificate they deem closest to their country’s specific conditions.

The BREEAM’s adaptation studies are still ongoing in 15 countries. The countries are shaping the certificates in accordance with their own resources and geographic positions.

According to ÇEDBİK’s studies, in Turkey’s special certification process, earthquake parameters will also be added. Noting that such a certificate system will be more valuable for Turkey, Erten said: “Increasing the allocation points of water and energy resources will be necessary. Since green materials are constricted in Turkey, their allocation points will be low. We want to make a Turkish contribution to BREEAM. We plan to include the home office concept by providing credits in the certificate.”

Istanbul Mega-Project Signals Rising Housing Market Confidence

The announcement that the sale of residences has begun at a landmark US$2.5bn mixed-used development project, under construction in the centre of Istanbul, highlights the momentum now building in Turkey's residential construction market. BMI notes that following the economic downturn, the alignment of key factors such as robust economic performance, rising housing loans and a stable banking sector with strong population pressure and tourism growth is fuelling expectations of a housing boom.

The Zorlu Centre mega project is a 102,000m2 mixed use development and the first of its kind in the country. Indeed, the existence of such a flagship project will add to Istanbul's attractiveness to international developers -- particularly those in the Middle East and UAE, where such multi-purpose developments have proliferated in recent years, but where real estate opportunities remain muted.

The demand levels for residences from the project will be a useful bellwether for gauging market sentiment, with foreign investors likely to be watching closely. BMI expects strong demand given both the strategic location and high profile nature of the project. The residential development will consist of 584 luxury residences, ranging from 117m2 to 733m2, with prices starting from US$9,500 per m2. The project will also include a shopping centre with nearly 200 stores as well as a 50,000m2 culture and arts centre, 22,000m2 of office space and a five-star hotel.

Having experienced a deep contraction of nearly 25% year-on-year (y-o-y) in real terms over 2009, we anticipate a strong rebound of 4.5% real growth in Turkey's residential and non-residential construction industry value in 2010. Indeed, we are increasingly upbeat about the prospects for the residential construction sector as the necessary foundations for a strong and sustainable housing market appear to be falling into place.

Underpinned by a strong macroeconomic outlook and a stable, well capitalised banking sector, consumer loans and, notably, housing loan volumes are on the rise, opening up the housing sector to the rising and increasingly affluent population. Indeed, a strengthening middle class should allow banks to be more aggressive in their lending practices as they compete for greater market share, which will further open up the market to those previously unable to access the mortgage market.

Improvements in lending will therefore reduce financial risks for developers who may have previously been deterred by such weaknesses. Indeed, with a depressed European housing market and a Middle East real estate market still in varying stages of recovery, Turkey is a BMI top pick for the region. Our bullish forecasts reflect this attractive outlook, predicting 5.7% y-o-y between 2010 and 2014.