Turkey aims to rake in cash with lucrative privatizations

ANKARA - Hürriyet Daily News

Finance Minister Şimşek (4th R) and Energy Minister Yıldız (3rd R) hold two symbolic checks totaling $2.5 billion with firm representatives. AA photo

A joint venture of three Turkish companies has taken over the operational rights of two major electricity grids, putting $2.5 billion in the state’s coffers.

The venture of Cengiz-Kolin-Limak, which is also part of the five-company consortium that won the tender for the third airport to be built in Istanbul, signed the contract that gives the operational rights of Istanbul’s European side grid, Boğaziçi Elektrik, and the Mediterranean region’s grid, Akdeniz Elektrik.

The group paid $1 billion of the total amount in cash to the Privatization Administration (ÖİB) yesterday, ÖİB acting Chairman Ahmet Aksu said at the transfer contract signing ceremony.

The transfer marked the privatization of two thirds of the electricity distribution sector, Finance Minister Mehmet Şimşek underlined.

“Hopefully, we will transfer other distribution networks as well within the upcoming two or three months, and all distribution will be conducted by the private sector, in a much more efficient way,” he said.

The winning venture had already been operating the electricity grids of the Uludağ and Çamlıbel distribution regions that means following yesterday’s ceremony, the group will officially serve 11 Turkish provinces in these four regions.

“We’re the largest private electricity distribution and retail company, distributing some 46 billion kw/h electricity to 9.5 million subscribers,” Limak Holding Chairman Nihat Özdemir said.

He added that the group had invested $450 million in two grids since 2010, the year they earned their operational rights. Now, it aims to invest $500 million in the four grids every year.

The group has signed a loan contract worth $3 billion with Turkish lenders Deniz Bank, Garanti Bank, Halk Bank, İş Bank, Vakıf Bank and Ziraat Bank in order to finance the transfer of the two distribution companies’ shares.

Özdemir also voiced Cengiz-Kolin-Limak’s intention to manage the four grids from a single point from 2015, thanks to its information technologies investment plans.

Roadmap of privatizations

Spurred by the huge interest from Turkish giants in the processes - as in the case for grid privatizations - Turkey’s privatization marathon is continuing, with the country’s privatization body saying it wants to complete the sale of the $13 billion-worth portfolio by the end of this year.

“2013 is an important year for privatizations,” the ÖİB acting chairman said during the ceremony.

The privatization of Turkey’s national lottery company and the public offering of toll roads and bridges are the most prominent parts of that portfolio.

Aksu said they were currently working on founding a legal scheme for the establishment of a new company to operate toll roads that would then be offered to the public.

“Our studies with the Transportation Ministry on legal schemes for this are ongoing. The law will pass according to Parliament’s schedule, but even after the law is passed the establishment of the company will take some time,” he said, adding that the process may end by the end of this year, or may be delayed until next year.

The Finance Ministry had canceled the $5.7 billion toll road privatization tender, finding the winning bid lower than expected.

Touching on the privatization process of the national lottery, which has drawn huge interest from both local and foreign investors, Aksu said they would collect all opinions regarding the process in the upcoming 10 to 15 days. He noted that a “road show” regarding the process might be held to inform potential investors.

Media and energy group Doğan Holding, which owns the Hürriyet Daily News, as well as Turkey’s Net Holding and its U.S. partner are among the candidates for the tender.