Utilities have been pressing the government to relax sulphur limits for coal imports since December in a bid to source cheaper fuels and reduce their input costs, as the Turkish lira continues to slide.

A change in regulation is likely to be approved in the coming weeks, according to market participants.

Utilities are in talks with the energy and environment ministries about having the sulphur content limit of imported coal increased to as much as 3pc from the current 1.2pc, while committing to keep emissions within legal limits.

The environment ministry imposed the existing 1.2pc limit in 2015.

Cement companies and other industrial users might also submit a proposal to the energy ministry to have their sectors included in any relaxation of the limit. Cement makers can currently source up to 2pc sulphur coal with a special permit from the energy ministry, but would benefit from a 3pc limit.

If the environment ministry agrees to increase the limit, it will send its decision to the energy ministry for approval. Should all related bodies approve, a change in the law could be enacted within a week.

Several utilities would seek US high-sulphur coals — displacing some Colombian and Russian material — should limits be relaxed.

Some US coal has a higher calorific value than coal from elsewhere, but also a higher sulphur content, at 2-4pc. This causes US coal to price at wide discounts to Colombian and Russian product.

Two Turkish utilities say they could fire US 3pc sulphur coals could directly in their boilers, without the need to blend, but some older units would be unable to do this.

Most of Turkey's imported coal-fired units can use US coal for at least a quarter of their needs, some market participants said. Utilities would have to calculate the fouling effect of the higher sulphur content on boilers — along with the impact on emissions — to prevent damage to assets and to maintain utilisation rates.

Some older plants might also decide to invest in desulphurisation units that would enable them to take more higher-sulphur coals, assuming the any extra expenditure can be offset by operational cost savings.

A potential benefit of any law change would be a stronger negotiating position for utilities when sourcing their fuel, although they might not have immediate flexibility to switch to US coal.

Some utilities have already secured 70-80pc of their fuel needs under term contracts for 2018, but some could ask for contract revisions if the sulphur cap is relaxed.

Assuming US NAR 6,900 kcal/kg 3pc sulphur coal is blended 25pc with Colombian material, the energy-adjusted cost would have been TL13.01/mn Btu yesterday, against TL13.68/mn Btu for 100pc Colombian coal.

Coal-fired utilities in strong position

The energy ministry rejected a request from utilities to relax sulphur limits some years ago, on the grounds that imported coal-fired plants should burn more Turkish coal. But most Turkish coal does not meet the technical requirements to be burnt in most of these plants. And domestic mine production is not always reliable.

Imported coal-fired units have geographical advantages — most are near the Marmara Sea, a centre of heavy industrial and residential power consumption.

Power demand in Turkey has been growing steadily, and thermal output is key to maintaining supply and grid security, despite the government's preference for using local resources.

And the lower hydro reserves already reported for this year suggest that imported coal fired-units might increase their utilisation rates from 2017 levels.