ANNEX A
GENERAL BACKGROUND TO THE ILISU DAM PROJECT
1. The Turkish Government has for many years been developing plans for hydro-electric power generation in South Eastern Anatolia (the "GAP" project). As a result of an increased demand for electricity following greater urbanisation and industrial and commercial development, those plans are now being implemented. A large dam is planned at Ilisu on the River Tigris, 65 kms upstream from the borders with Iraq and Syria. In 1997 the Turkish Government invited Sulzer Hydro of Switzerland to form a consortium to build a power plant there, on the understanding that a 100% debt financing package would be arranged by the consortium and its banking advisers, UBS of Switzerland. The export credit agencies of the main countries represented in the consortium have been approached for credits.
2. Once construction starts, it is expected that the project will take at least seven years to complete. The sponsors of the project are the Turkish Government, through the Agency for State Hydraulic Works (Devlet Su Isleri or "DSI"). The total cost is likely to be around $2 billion, half of which would be for imported elements. Balfour Beatty are to lead the civil works element of the project. Although prices have yet to be finalised, their potential share of the contract value is estimated at around $315million: $215million from the UK and $100million from a US subsidiary. Much of the $215 million will be spent on equipment and services to be exported from the UK.
3. Balfour Beatty made a formal application to ECGD for export credit in October 1998. In April and May 1999, Ministers commissioned two reports through ECGD; an independent evaluation by a firm of environmental consultants of the environmental components of the EIAR commissioned earlier by Sulzer AG; and a report on resettlement issues conducted by an academic from the University of Bradford. On 21 December 1999, in a press release, the Secretary of State for Trade and Industry released the two reports and announced that he was;
"1/4minded to grant export credit1/4conditional on the Turkish authorities agreeing to address the concerns we have about the environmental and social impact of the project1/4"
Those concerns, identified as areas where changes would be required before the British Government could consider export credit support, were: a) the need to draw up a resettlement programme which reflected internationally accepted practice and included independent monitoring; b) provision being made for upstream water treatment plants capable of ensuring the maintenance of water quality; c) an assurance that adequate downstream water flows would be maintained at all times; and d) the production of a detailed plan to preserve as much of the archaeological heritage of the historical town of Hasenkeyf as possible.
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