Plans to build the Ilisu Dam were first mooted in 1954. Although pre-feasibility studies were completed in 1971 and the final design for the dam was approved in 1982, the project remained on the drawing board until the late 1990s.

One reason for the delay lay in a lack of finance. From 1984, the Turkish security forces were engaged in a vicious armed conflict against the Kurdistan Worker’s Party throughout the Kurdish region of Turkey. The war left the Turkish government unable to fund the project on its own account. The conflict also led to the World Bank and other multilateral development agencies signaling that they would be unwilling to finance infrastructure projects in the region.

In 1996, the Turkish government sought to raise the necessary finance by offering Ilisu to the private sector as a Build-Operate-Transfer project. No bidder could be found, however, raising questions over the project’s commercial viability. A year later, the Turkey’s State Hydraulic Works (DSI) selected the Swiss turbine manufacturer Sulzer Hydro as the main contractor for the project. The project was never put out for international tender.

Whilst Sulzer Hydro retained responsibility for the electromechanical works, in conjunction with ABB of Switzerland, it subcontracted the civil engineering works to a consortium led by UK construction company Balfour Beatty. Other companies in the consortium included Impregilo of Italy, Skanska of Sweden and three Turkish construction companies, Nurol, Kiska and Tekfen. The engineering consultants to the project are Binnie and Partners (now Binnie, Black and Veatch). As yet, no contracts have been signed between the DSI and any of the companies in the consortium.

ABB’s involvement in the dam ceased in March 2000, when it sold out its hydropower business to Alstom of France. Three months later, ABB announced a new focus on alternative energy technologies, such as wind and solar - a market the company described as "huge". ABB stated that it expected to increase its sales in renewables and small-scale power generation from $400 million to $1.4 billion by 2004. The decision followed a decade long campaign by Swiss, Swedish and international NGOs to persuade ABB and other power generation companies to reconsider their involvement in hydropower - a campaign that had included tactics from mass letter writing to protests and shareholder actions. ABB has said that the decision was taken on the basis of an overall market analysis - but that the company took the growing sensitivity of major shareholders regarding social and environmental concerns "very seriously".

In September 2000, the Ilisu consortium lost another of its original members, when Skanska, which had a 24 per cent share in the project, announced its withdrawal from the project. Unlike ABB, whose place was filled by Alstom, Skanska has yet to be replaced. Although the company told the Financial Times that the decision resulted from unspecified negotiating problems which were unrelated to public protests over the social and environmental impacts of the project, company spokesperson Thor Krussel told the Turkish newspaper Ozgur Politika that the firm did not participate in projects which are "not to the benefit of society and the environment." In an interview with the London Guardian newspaper, Krussel also pointed out that the company’s environmental policy had been updated so that the company was now committed to "caring about people and the environment" in all its work. Krussel stated: "Skanska will abstain from participating in construction projects when in our judgement a project will result in serious risks to the environment or to society at large."

Of the companies remaining in the consortium, Impregilo and Sulzer Hydro have all been criticised for their involvement in a number of dams which have resulted in adverse social and environmental impacts. Balfour Beatty (who have now withdrawn from the project) and Impregilo are currently being prosecuted in Lesotho on corruption charges arising from their involvement in the Lesotho Highlands Water Project.

Export Credit Agency Involvement.

Although the DSI is the project developer, the financing for Ilisu has (at the Turkish government’s request) been handed over to the construction consortium which has been charged with raising the full construction costs for the project.

The financial package for Ilisu will be arranged by the Union Bank of Switzerland (UBS). With approximately half of the construction costs being made up of imports from Western Europe and the USA, the companies in the consortium sought government-supported export credit guarantees from the Export Credit Agencies (ECAs) of eight countries - Germany, Italy, Japan, Portugal, Sweden, Switzerland, the UK and the USA.

In November 1998, the Swiss export credit agency, Exportrisikogarantie (ERG), approved provisional export credit support of 470 million Swiss francs for the Ilisu contracts of Sulzer Hydro and ABB.

Conditional approval has also been granted by the UK’s Export Credits Guarantee Department (ECGD) for a $200 million credit for Balfour Beatty, whose US subsidiary has also obtained provisional consent to a further credit from the US Exim Bank. Italy’s export credit agency SACE has similarly given approval for a $152 million guarantee to Impregilo, although this has still to be confirmed by the Interministerial Committee on Economic Planning (SACE having formally requested an opinion on its financial involvement in the project).