2011 dismal year for sell-offs, report says

ISTANBUL

The Turkish government is struggling to privatize electricity distribution grids across the country, however, many bidders have failed to make payments so far.

The total value of global privatizations during 2011 fell sharply from the previous two years’ record levels, and there has been only a partial rebound during the first half of 2012, according to a research report published yesterday by Privatization Barometer and its partner KPMG Advisory. The report said that while governments are highly likely to eventually turn to privatizations to help recover from their current fiscal woes, this will probably not begin until markets stabilize. 

“While 2011 will doubtless be remembered as a down year for completed privatizations, it was actually even worse in terms of the number and value of privatization sales that failed, were canceled, or were withdrawn,” read the report. 

On a country basis, the report outlined that the greatest collapse took place in Greece, which was forced to admit in early 2011 that it would be able to raise only a very small fraction of the promised 50 billion euros ($67.5 billion) from selling state assets during 2011-2015. 

In September 2011 Spain experienced the largest two canceled deals of the year, both at very late stages in the sales process. These were the proposed public offering of a 30-percent stake in the state lottery operator, and the auction of the Madrid (Barajas) and Barcelona (El Prat) airports. These were scheduled to raise as much as 7 billion euros ($9.7 billion) and 5 billion euros ($6.9 billion), respectively. 

Russia also suffered three failed privatizations during 2011 and the first half of 2012, including last year’s second largest. This was the canceled offering, in November 2011, of 6.9 percent of the state’s holdings in Sberbank due to poor market conditions, which could have raised as much as $6 billion (4.3 billion euros), according to the report. 

As in Europe, privatizations in non-European countries also witnessed a decline during 2011. China was the leader in the total value of privatizations (19 deals; $14.12 billion), followed by Australia (five deals; $9.26 billion), the United States (one deal; $8.70 billion). However, all of these national totals represent sharp drops from 2009 and 2010.