Category A project supported: Kaparinar Yeka Solar Power Plant (Kalyon), Turkey

1. Project description

UK Export Finance has agreed to provide support to Kalyon Güneş Enerjisi Üretim A.Ş. (the “Borrower” or the “Project Company”) for the design, construction and operation of a solar power plant and all ancillary equipment and systems in the Karapinar district of Konya, Turkey (the ” project “). The project company is a special purpose vehicle (VSP) wholly owned by Kalyon İnşaat Sanayi ve Ticaret A.Ş. (the Godfather “). UK Grid Solutions Ltd, owned by General Electric Company (GE, or “supplier”), is providing inverter stations, tracking systems and other electrical supplies to the project.

The objective of the project is to use solar energy to generate electricity. The maximum capacity of the project will be 1,000 megawatts of alternating current (MWac), which will significantly contribute to a renewable and carbon-free electricity supply from the national grid, contribute to Turkey’s energy transition and help meet the increasing demand for electricity throughout Turkey.

The Project includes:

  • The installation of a solar power plant consisting of 3,376,890 photovoltaic (PV) panels with a gross capacity of approximately 1,000 MWac or 1,348 megawatts of direct current (MWdc),

  • two substations (a 400kV substation north of the site and a 154kV substation south of the site), mounting and monitoring structures, DC/AC inverters, cabling, transformers, a system control and data acquisition (SCADA), and

  • electrical transmission lines (ETL) – one 154kV ETL and two 380 kV ETLs, less than 5 km long, to connect the electricity produced to the national grid.

The project does not include any associated facilities. The infrastructure associated with the solar plant (power substations and overhead ETLs) was included as part of the project.

2. Project sector

The project is in the renewable energy sector.

The project is developed by Kalyon Güneş Enerjisi Üretim A.Ş.

4. UK exporters

UK Grid Solutions Ltd, a subsidiary of General Electric.

5. Export Credit Officer Bank

JP Morgan

6. Amount of UK export finance support

The main value of the support is £189.8 million

7. OECD Common Approaches and Equator Principles

UK Export Finance has classified the project as Category A, i.e. having potentially significant environmental, social and human rights (ESHR) as defined in the OECD Common Approaches to Officially Supported Export Credits and Environmental and Social Due Diligence of 2012 (revised 2016) (the “OECD Common Approaches” ) and the Equator Principles (2020). The project was considered to have the potential to negatively impact critical habitat due to the presence of the Karapinar Plain Key Biodiversity Area (KBA), which includes the Important Plant Area of ​​the Karapinar Plain (APIs) and the Karapinar Plain Important Bird Area (IBA).

As required by the OECD Common Approaches, UK Export Finance has disclosed its possible involvement in the project. A notification was posted on the UK Export Finance website on 24th December 2020 which directed interested parties to the contact hence the post ESHR information can be sourced. No inquiries have been received by UKEF or the contact point following this notification.

8. Environmental, social and human rights standards

Project related ESHR documentation was reviewed for alignment with the 2012 International Finance Corporation (IFC) Performance standards (PS) on Environmental and Social Sustainability and the relevant World Bank Group Environmental, Health and Safety Report (EHS) Guidelines.

If applicable IFC PS were:

  • PS1: Assessment and Management of Environmental and Social Risks and Impacts;

  • PS2: Labor and working conditions;

  • PS3: Resource Efficiency and Pollution Prevention;

  • PS4: Community Health, Safety and Security;

  • PS5: Land Acquisition and Involuntary Resettlement;

  • PS6: Conservation of Biodiversity and Sustainable Management of Living Natural Resources; and

  • PS8: Cultural Heritage.

The relevant World Bank Group EHS The guidelines were:

9. Kind of ESHR impacts

The examination of the potential ESHR risks and impacts considered the following impacts, receptors and issues during the construction and operation phases of the project:

  • occupational health and safety;

  • working conditions, terms of employment and labor management;

  • human rights risks in the supply chain;

  • resource efficiency (particularly water use);

  • emissions to air (including soil, air and water);

  • Wastewater;

  • waste and hazardous materials management;

  • emergency preparedness and response;

  • climate change, including physical and transitional risks and opportunities;

  • community health and safety, including the use of security personnel;

  • grievance mechanisms (internal and external);

  • land acquisition and economic displacement;

  • biodiversity, including the potential presence of critical habitats; and

  • stakeholder engagement.

ten. Evaluation of ESHR impacts

A review was undertaken in accordance with the requirements of the OECD Common Approaches and the Equator Principles to identify ESHR the risks and impacts of the project and how these would be effectively managed. Mott McDonald has been appointed Independent Environmental and Social Advisor (IESC) for the group of lenders.

The review included:

  • a review of project documentation;

  • a site visit, including a visit to the construction areas, visits to the nearest settlements (Ekmekçi and Hacıseyit) and interviews with site staff and villagers; and

  • interviews with environmental and social impact assessment consultancy (RINA) and corporate and project level sponsors.

The results of this review, including IESCThe project findings formed the basis for the assessment of the project’s alignment with relevant international standards and recommendations for future compliance and monitoring.

Based on the review, the project was found to be likely to cause a number of adverse environmental and social impacts both during construction and operation. However, a suite of controls proposed as part of the project’s environmental and social management systems should facilitate the management of these impacts and mitigate them to acceptable levels.

11. Climate Change Considerations

UKEF has taken into account the direct and indirect greenhouse gas potential (GHG) the project’s emissions and the effects of climate change factors on the project as part of its ESHR review.

The project commissioned a climate change risk assessment, which considered project emissions and potential physical and transition risks. Scope 1 and Scope 2 greenhouse gases (GHG) the project’s emissions during the operation phase have been estimated by the project at around 320 tonnes of CO2 equivalent per year (tCO2e/year), which is significantly lower than the relevant quantification and reporting thresholds set by the standards international.

Overall, the project will provide a significant source of renewable energy, which is expected to have a positive impact on climate change through a net reduction in GHG emissions when this electricity consumption replaces that produced by other more carbon-emitting sources. Based on an annual solar energy production of 2,300 GWh and a GHG emission factor for Turkish national grid electricity of 0.481 kgCO2e/kWh, the project could result in a reduction of approximately 1,106,000 tCO2e on average each year, if it replaces the electricity that would otherwise have been generated via the National Network. It is recognized that this estimate of avoided emissions will decrease in magnitude as Turkey shifts its electricity generation capacity to low-carbon sources and the average carbon intensity of its grid decreases.

The review found that the project design duly considered the potential physical impacts of climate change, such as changes in rainfall and weather patterns.

12. Decision

Various actions have been agreed between the project company, the sponsor and the parties involved in the financing, which are necessary to ensure the continuous alignment of the project with international standards. Following agreement on these commitments, it was concluded that the project should adhere to relevant international standards throughout the project cycle. Subsequently, UKEF decided to support the supply of goods and services from UK exporters to the project.

A condition of UKEF support is that the project is subject to monitoring and reporting to ensure that the project is aligned with relevant international standards throughout the duration of UKEF support.

UK export finance

February 2022