World Bank and TKB to launch Geothermal Risk Sharing Mechanism in Turkey

The World Bank and the Development Bank of Turkey (TKB) are cooperating under the framework of the Geothermal Development Project that is to dispense  $39.8 million for geothermal development in Turkey. Within the context of this project, $38 million will be used capitalize a Risk Sharing Mechanism (RSM); a fund that will be used to share the resource risk during the exploration drilling phase with private investors.

The remaining $1.8 million will be provided as a grant to TKB to fund technical assistance related to the management of the RSM to manage the fund; most importantly fund the services of a technical consultant that will support TKB in the implementation of the RSM.

The Risk Sharing Mechanism has been established and TKB is finalizing the selection of the RSM consultant.  It is anticipated that eligible developers can submit applications for risk coverage by the RSM mechanism by April 2018.

At the IGC 2018 Turkey geothermal congress in Ankara, 14-15 March 2018, the World Bank will host a workshop with the Development Bank of Turkey (TKB). In the workshop the Geothermal Risk-Sharing Mechanism will be presented, informing investors and industry on the requirements for coverage by the RSM and the details of the process for submitting applications.

In the framework of the project:

• The Risk Sharing Mechanism (RSM) will be implemented for a period of 5 years. This period may be extended or shortened depending on the availability of funding.
• Public or private developers who have a valid exploration license for at least 18 months will be able to apply for RSM.
• Applications will be ranked based on the quality of surface exploration work carried out and the quality of the business plan for the project.
• Success criteria will be defined on a case by case bases depending on the technical information on the resource and the viability of the business plan.
• Project developers will apply for coverage by the RSM. An agreement will be signed with each developer for a maximum of 5 wells. The agreement will be terminated in case two wells are found to be unsuccessful.
• Developers will pay a 10% success premium for each of the first three wells that turn out to be successful. For wells 4 and 5 in a 5 well program the success premium will be 25%.  A guarantee letter will be issued at the beginning for the success premium.
• In case of failure the RSM will pay 40% of the well cost for projects in Aydin, Denizli and Manisa region and 60% in other regions of Turkey. The maximum amount to be paid out of the RSM, assuming a, three well program will be capped at $4 million.
• If the CO2 emission rate in the wells for electricity generation exceeds 583g / kWh;
  • If the well fails, the deal ends.
  • If the well is successful, the program will be stopped and an additional time will be provided to prepare a plan to reduce CO2. If such a plan is not provided at the end of the grace period, the RSM agreement is terminated. In this case the developer will not pay the success premium
  • If the plan is valid, the well will be considered successful but the plan
    • If the investor pays financial burden, it can be waived from the success premium
    • If the emission mitigation plan does not result in extra cost for the developer, the success premium is collected.
  • The project will be subject to the World Bank Environmental and Social Safeguards Policies, including Land Acquisition Rules.

ThinkGeoEnergy and JeotermalHaberler.com, we would like to thank Ruken Öztekin, the manager responsible for the World Bank & TKB Risk Sharing Mechanism, for this valuable information.

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Source: TKB, JeotermalHaberler

Note: This is an updated version of the article, now reflecting updated information provided by the World Bank.