Notice

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

Published 1 March 2022

1. Project Description

UK Export Finance has agreed to provide support to Kalyon Güneş Enerjisi Üretim A.Ş. (the “Borrower” or “Project Company”) for the design, construction, and operation of a solar power plant and all ancillary equipment and systems in Karapinar district in Konya, Turkey (the “Project”). The Project Company is a Special Purpose Vehicle (SPV) 100% owned by Kalyon İnşaat Sanayi ve Ticaret A.Ş. (the “Sponsor”). UK Grid Solutions Ltd, owned by General Electric Company (GE, or “Supplier”), is supplying inverter stations, tracker systems and other electrical supplies to the Project.

The aim of the Project is to utilise solar energy to produce electricity. The Project maximum capacity will be 1,000 megawatts of AC power (MWac), which will significantly contribute to a renewable and zero carbon supply of electricity to the national grid, contribute to Turkey’s energy transition, and help meet the increasing electricity demands throughout Turkey.

The Project comprises:

• 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 DC power (MWdc),

• two substations (a 400kV substation at the north of the site and a 154kV substation at the south of the site), mounting and tracking structures, DC/AC current inverters, cabling, transformers, a Supervisory Control and Data Acquisition (SCADA) system, and

• electrical transmission lines (ETLs)—a 154kV ETL and two 380kV ETLs, which are all under 5km in length—to connect the produced electricity to the national grid.

The Project does not include any Associated Facilities. Infrastructure associated with the solar power plant (electricity substations and overhead ETLs) has been included as part of the Project.

2. Project Sector

The Project is in the renewable energy sector.

3. Project Sponsors

The Project is being developed by Kalyon Güneş Enerjisi Üretim A.Ş.

4. UK Exporters

UK Grid Solutions Ltd, part of General Electric.

5. Export credit agent bank

JP Morgan

6. Amount of UK Export Finance support

The principal value of the support is £189.8m

7. OECD Common Aproaches and Equator Principles

UK Export Finance categorised the Project as Category A, i.e. having potentially significant environmental, social and human rights (ESHR) impacts in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the Equator Principles (2020). The Project was considered to have the potential to adversely impact upon a critical habitat due to the presence of the Karapinar Plain Key Biodiversity Area (KBA), which incorporates the Karapinar Plain Important Plant Area (IPA) and the Karapinar Plain Important Bird Area (IBA).

As required by the OECD Common Approaches, UK Export Finance 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 from where published ESHR information can be sourced. No enquiries were received by UKEF or the contact point as a result of this notification.

8. Environmental, Social and Human Rights Standards

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

The applicable IFC PS were:

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

• PS2: Labour and Working Conditions;

• PS3: Resource Efficiency and Pollution Prevention;

• PS4: Community Health, Safety and Security;

• PS5: Land Acquisition and Involuntary Resettlement;

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

• PS8: Cultural Heritage.

The applicable World Bank Group EHS Guidelines were:

• General EHS Guidelines (2007); and

• EHS Guidelines for Electric Power Transmission and Distribution (2007).

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

• occupational health and safety;

• working conditions, terms of employment and management of labour;

• human rights risks in the supply chain;

• resource efficiency (in particular the use of water);

• emissions to the atmosphere (including land, air and water);

• wastewater treatment;

• waste and hazardous material management;

• emergency preparedness and response;

• climate change, including physical and transition 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.

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed. Mott McDonald was appointed to act as the Independent Environmental and Social Advisor (IESC) for the Lender Group.

The review included:

• a review of Project-related documentation;

• a site visit, including a tour of the construction areas, visits to the closest settlements (Ekmekçi and Hacıseyit), and interviews with site personnel and villagers; and

• interviews with the Project’s environmental and social impact assessment consultancy (RINA) and with the Sponsors at a corporate and Project level.

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

Taking account of the review, the Project was deemed to have potential to cause a number of adverse environmental and social impacts both during construction and operation. However, a proposed suite of controls as part of the Project’s environmental and social management systems should facilitate the management of these impacts and mitigate these to acceptable levels.

11. Climate change considerations

UKEF considered the potential direct and indirect green house gas (GHG) emissions of the Project and effects of climate change factors on the Project as part of its ESHR review.

The Project comissioned a Climate Change Risk Assessment, which considered Project emissions and potential physical and transition risks. The Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions for the Project during the operational phase were estimated by the Project to be approximately 320 tonnes CO2 equiv per annum (tCO2e/y), significantly below relevant thresholds for quantification and reporting set by international standards.

Overall, the Project will provide a significant source of renewable energy, which is anticipated to have a positive impact on climate change through a net reduction in GHG emissions where this electricity use displaces that produced via other higher carbon emitting sources. Based on an annual solar power generation output of 2,300 GWh and a GHG emission factor for electricity from the Turkish national grid of 0.481 kgCO2e/kWh, the Project could result in a reduction of approximately 1,106,000 tCO2e on average each year, if it displaces electricity that would otherwise have been generated via the national grid. It is acknowledged that this estimate of avoided emissions will decrease in magnitude as Turkey transitions its electrical power generating capacity to lower carbon sources and the average carbon intensity of its grid decreases.

The review revealed that the Project design has appropriately considered potential physical impacts of climate change such as changes to rainfall and weather patterns.

12. Decision

Various actions have been agreed between the Project Company, Sponsor, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. Subsequently UKEF has decided to provide its support in respect of the supply of goods and services by UK exporters to the Project.

A condition of UKEF support is that Project will be subject to monitoring and reporting in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of UKEF support.

UK Export Finance

February 2022