A. Ian Gillespie

President

Export Development Canada

151 OConnor

Ottawa, ON  K1A 1K3

September 5, 2003

Dear Mr. Gillespie:

I am writing you with regards to potential EDC involvement in the Yamula Dam, in the Kayseri province of Central Turkey.

Construction of the dam began in 2000, and it is currently 40% complete. The dam is scheduled to be in service by mid-2005, at which point it will have a capacity of up to 100 megawatts. The owner and operator of the Yamula facility is the Turkish Kayseri Elektrik Uretim Sanayi ve Ticaret.

In May 2003, General Electric announced that it had received a contract of US$17.9 million to supply hydro turbines, generators, and additional equipment and services for the dam and power plant. The parts will be constructed at GE facilities in Norway, Brazil and Canada, with GE Canada responsible for supplying the generators. GE Hydro, which is responsible for designing, supplying and installing the equipment, has arranged export credit financing through the export credit agency of Norway with GE Capital.

We think it is likely that Export Development Canada will also be approached to provide some financial services as well given GE Canada’s involvement. We would therefore like to raise a number of issues with you.

Resettlement issues, as well as charges of bribery, rigging state tenders and abuse of office, have been associated with the project. These problems are not atypcial of large infrastructure in Turkey; human rights abuses and resettlement issues have also arisen with the Ilisu Dam and BTC pipeline in Turkey.

To assist in mitigating such problems, we have learnt through our associates that the German company Siemens, who was unsuccessful in winning the contract, would have received a guarantee from German ECA Hermes under the condition that the project sponsor be in charge of resettlement (rather than Turkish authorities) and that it also be responsible for closely monitoring resettlement.

Since EDC’s current practices do not allow us to definitively determine whether the current project is under consideration, in light of the above information, we are wondering if you could clarify the following:

1) How will EDC categorize this project?

We would urge you to classify this as a Category A project, even though GE Canada’s participation may be less than SDR 10 million. The reasons for doing so are twofold:

Firstly, this project is clearly one with known significant adverse environmental and social impacts. The EIA, including a resettlement plan, should be released to the public before EDC takes a decision to allow consultation and new information come to light.

Secondly, it is not uncommon for a multinational parent company to win a contract and sub-divide the work among its different plants (as ABB-Alstom did in the Ralco Dam project). This parcelling reduces the chances of triggering appropriate standards as it subdivides transactions to below financial institutions thresholds  a loophole that is evident in EDC’s current Environmental Review Directive.

2) Will EDC attach any environmental and social conditions to this project, similar to those Hermes was proposing to do, and if so will they be made available to the public to enable stakeholders to assist in holding the company accountable to the conditions?

We look forward to any information you are willing to share regarding how you have been or will be approaching this project.

Yours sincerely,

Fraser Reilly-King

Coordinator, NGO Working Group on EDC