Geothermal exploration and development is a high-risk investment because of the uncertainty associated with a natural resource that can only be validated for power generation with high capital expenditures for drilling. MTA has limited its exploration and license tendering activities and private investors now have to finance 100% of the exploratory risk after acquiring rights to the license area. Moreover, similar to many other countries, commercial financing is generally not available in Turkey until the geothermal resource has been validated and construction of the power plant has commenced.
Therefore, the objective of the RSM project is to increase private sector investment in geothermal exploration drilling in Turkey by providing partial coverage of exploration drilling costs in case of unsuccessful wells. Funding of the RSM will be provided by a contingent grant from the Climate Technology Fund (CTF) to the Government of Turkey. It is expected that a total of 38 million USD will be available for exploration drilling projects by the RSM. The implementing agency will be a dedicated unit (RSM Unit) within the Development Bank of Turkey (TKB).
Within the scope of RSM, once the Beneficiary is successfully enrolled in the program;
- 40% to 60% of the cost of failed wells will be paid by the RSM to the Beneficiary up to a total of $4 million under a scheduled program.
- If the first two wells in a three well program are unsuccessful, the contract between the RSM and the Beneficiary is automatically terminated.
- Higher coverage will be given for wells outside the Aydin, Denizli and Manisa, where geothermal exploration is less advanced.
- A success fee, amounting to 10% of the estimated well cost, is either paid upfront by the Beneficiary to the RSM or a letter of guarantee is provided.
- When a completed well meets or exceeds the success criteria that has been set on a custom basis for the drilling program the success fee is retained by the RSM, but otherwise it is reimbursed to the Beneficiary.