Foreigners hesitant to bid for energy
Turkey’s first auction of power grids lured two foreign utilities, compared with at least eight that planned to participate in 2006, as a legal challenge to oust the prime minister and an electricity-price cap deter bidders.
When Turkey announced the auction of power lines that serve Ankara and the industrial Sakarya region near Istanbul two years ago, more than 30 Turkish and foreign companies sought details, among them E.ON, Germany’s biggest utility, and Italy’s Enel. Now, Austria’s Verbund and Prague-based CEZ are the only international companies remaining among the five bidders for each grid, according to the state asset-sales agency.
Prime Minister Recep Tayyip Erdoğan is seeking cash from abroad to offset a trade deficit estimated to widen 32 percent and needs to lift power output to avert shortages as capacity fails to match rising demand. Foreign investors are backing out because of a lawsuit that may ban Erdoğan from politics for Islamist policies and delays in raising power prices to compensate for rising oil and gas costs.
“It’s a very poor start to the government’s privatization plans for the energy sector,” said Wolfango Piccoli, an analyst at Eurasia Group in London. “This raises concerns for the sale of other distribution regions and about the money Turkey can raise.”
Declining foreign interest in the power grids has increased investor concern Turkey may struggle to sell power plants and its first nuclear energy license. Turkey’s state asset sales are aimed at easing a current-account gap, the widest measure of trade in goods and services, that may reach $50 billion this year as oil and food prices surge.
Erdoğan’s government has sold about $27 billion of state companies since 2002, more than all its predecessors combined. The grid sales were due in January last year. The government postponed them in the run-up to July elections, which it won.
In case of party closure
Erdoğan’s Justice and Development Party is to defend itself at the Constitutional Court this week. Prosecutors want a five- year ban for Erdoğan and dozens of party members and the organization’s closure in a case that may last three months.
“Those who want to enter the electricity sector don’t know which government they will be dealing with,” said Ebru Eroğlu, an analyst at TEB Invest in Istanbul.
The energy-markets regulator approved a 22 percent price increase last month for electricity, the second in almost six years. Natural gas, used to fire half of Turkey’s generators, rose 420 percent in that period in London.
The potential cost deterred E.ON from placing a bid, said Klaus-Dieter Maubach, chief executive of E.ON Energie AG, the power-generation unit of E.ON AG.
“It’s not a question of whether we want to enter new markets, but rather if we can get a reasonable price for the assets we acquire there,” Maubach said in a June 24 interview in Munich. Roberta Vivenzio, a spokeswoman for Enel, didn’t respond to a message left on her mobile phone.
Power shortages
A lack of investment means Turkey, whose economy expanded at an annual rate of almost 7 percent since 2002, may suffer power shortages as early as next year, according to the World Bank. The government plans to issue a license in September to build its first nuclear-power plant.
Verbund expects Turkey to be one of the top five power markets in Europe by 2020, said Bernhard Raberger, a vice chairman at Verbund.
“In general we trust that in Turkey a competitive and liberal market is developing,” Raberger said in an e-mailed response to questions.
Demand for electricity is growing more than 8 percent a year and will almost double by 2016, according to a report by the state transmission company.
CEZ said electricity demand, growing about four times as fast as Europe’s, make the assets attractive. “The pricing and liberalization plans of Turkey have been considered in a bid,” said Eva Novakova, a spokeswoman for Prague-based CEZ.
Verbund, CEZ bid high at energy auctions
Austrian utility Verbund and its Turkish partner, Sabancı Holding, bid $1.23 billion to win a state auction for Ankara’s power network, while CEZ, the Czech Republic’s biggest utility, and its Turkish partner Akenerji bid $600 million to win a similar auction in Sakarya, northwest Turkey. Enerjisa, a unit co-owned by Verbund and Sabancı, beat rivals including CEZ and Doğan Holding, said Ahmet Aksu, a deputy chairman at the agency managing the sale. “This is one of the most important steps in creating a free electricity market in Turkey, which is necessary to deal with the supply troubles we face,” Enerjisa Chief Executive Selahattin Hakman said after the auction. The company has not yet decided on financing for the Ankara grid, he said. Enerjisa will bid in separate state auctions for power plants to gain 10 percent of the country’s electricity market by 2010, Hakman said, adding the company plans to invest $6.5 billion in generation by 2015. Enerjisa’s priority is to lower the amount of stolen and lost electricity at the Ankara grid, which is about 9 percent of revenue, Hakman said. The Ankara grid has 2.9 million customers. Meanwhile, CEZ and its Turkish partner Akenerji bid $600 million to win an auction for the Sakarya power grid. CEZ and Akenerji beat Verbund and Sabancı Holding to operate the network, which serves 1.3 million customers, said Ahmet Aksu, deputy chairman at the agency managing the sale. The government promised the International Monetary Fund it will reduce the state’s more than 80 percent share of the electricity generation and distribution markets. Turkey, with a population of more than 73 million people, plans to sell all 20 of its regional grids.
SOURCE: Turkish Daily News