Speeding up the privatization of Turkish electricity after obstruction

According to the “Financial Times” report, the process of privatization of power in Turkey has been pushed out by the regional distribution company Bogazici EDAS. Affected by the global financial crisis, Turkey’s privatization plan finally accelerated again after encountering resistance.

Since its establishment 30 years ago, Bogazici EDAS has operated the state-owned distribution network of Istanbul City, supplying power to half of Istanbul's largest city and 4.2 million European residents. The company had planned to monopolize the entire Turkish electricity retail industry by 2015, but on the 14th of this month, a power generation investment consortium of three Turkish construction companies had a total of 1.96 billion U.S. dollars (about 12.2 billion yuan). The price of **) acquired the company.

This power generation investment consortium is strong and has 2 of the 21 distribution companies in Turkey. With the purchase of Bogazici EDAS, the consortium will receive 8.2 million users and a total of 24.5% of Turkish residents will be supplied with electricity.

It is reported that Turkey's per capita electricity consumption is only 3,000 kWh, less than 25% of the EU's neighbors' per capita electricity consumption, but with rapid urbanization and an ever-increasing population, the demand for electricity is also increasing. According to the Ministry of Energy and Natural Resources of Turkey (MENR), in order to cope with the expected growth, by 2020, Turkey's installed capacity will double to 40,000 MW.

The privatization of power in Turkey has long been a commonplace, and as early as 30 years ago, Turkey had tried to privatize power assets. In 1984, the Turkish parliament passed the 3096 private ownership of energy bill. This far-reaching bill allows the private sector to build and operate power generation, transmission, and distribution assets. The year 2001 was the most critical year for the privatization of Turkish power, when it passed the Electricity Markets Act 4628. The bill redefines state-owned organizations that control the generation, transmission, and distribution of assets. It also has a basic function of dividing the original Turkish Power Transmission and Power Company (TEAS) into different organizations, including EUAS (Power Generation), TETAS (Power Distribution) and TEIAS (Transmission) companies. The real intention of separating assets is that they can easily be privatized.

In fact, the road to privatization is not very good. In the past two months, Bogazici EDAS was the second regional distributor to be sold in Turkey. At present, there are six other distributors in the country, such as Bogazici EDAS. From the previous round of bidding for the privatization of electricity in 2010, Bogazici EDAS attracted bidders to invest 2.99 billion US dollars to buy, but at that time the bid winner failed to complete the purchase before the deadline, and the second candidate bid winner decided to withdraw. This means that this round of tenders and plans to sell six other major power distributors plan to declare bankruptcy.

Analysts unanimously believed that the failure of these power company sales plans was caused by bidders overestimating the value of distribution companies. On the other hand, they underestimated the impact of the Eurozone crisis on the funds on the international market. These two points are enough to ruin the privatization of state-owned distribution companies in Turkey.

The privatization of regional distribution companies is an important step in the liberalization of the Turkish energy market. However, statistics show that about 46% of the power generation sales right is still in the hands of the state. Although Turkey is the first country in Europe to implement liberalization of the electricity market, Turkey is still in place compared to the process of completing the liberalization of the electricity market more quickly in neighboring countries.

Fortunately, the Bogazici EDAS sales case broke this dilemma. Even more gratifying is that Gediz EDAS, a distribution company in the Izmir port area of ​​the Aegean Sea in Turkey, is one of the six major tendering companies and is expected to complete the transaction within this month. The remaining five companies are also expected to open for sale at the end of this year. The remaining 41 companies will be divided into 9 batches of bids, and they are expected to openly bid in the first half of 2013.

The plan for the sale of the Turkish electricity company was deeply affected by the financial crisis in the world and the euro zone. In addition, Turkey’s domestic uncertainties continued to intensify, and its ambitious privatization plan has been badly transported in the past 10 years. Since 2006, when the privatization output reached a peak of US$8.1 billion, there has been no such event. Compared to 2011, the madness dropped to 1.4 billion U.S. dollars (about 8.7 billion U.S. dollars). This year, the output value of privatization has improved, and it has returned to the estimated 3 billion U.S. dollars (about 18.7 billion U.S. dollars).

As the Minister of Finance, Mr. Khimshek, predicted last month, the Bogazici EDAS and Gediz Elektrik power distribution companies will be privatized by the end of this year. But even if these privatization tenders are completed and they can only be finalized after the legal process is passed, these revenues will be credited to the next year's book, plus sales plans for other power distributors and some large state-owned power plants next year, 2013. Privatization output value is likely to set a new record.

Note: This article uses a real-time exchange rate of 1 US dollar = 6.2363 *** yuan