Privatization Has Generated 9 Billion Dollars in Revenues and Proceeds

The year 2012 has witnessed a “lively” and a buoyant episode in regard to the energy sector. With the reactivation of the suspended privatization projects, the new activity has brought in fresh vitality to the energy segment, resulting in a total of 45 mergers-and-acquisitions transactions worth an estimated 9.5 billion dollars. In the report titled “Mergers-and-Acquisitions in the Turkish Energy Sector,” drafted by the PwC, it is stated that the transactions pertaining to 2012 had been accomplished far above the initial assumptions, and that a total of 45 transactions and deals were concluded successfully in the energy segment, aggregating to a total value of 9.5 billion dollars – a figure shared with the general public. No doubt, the over-performance was attributable to the accelerating mergers-and-acquisitions which had taken place close to the expiry of the year.

The repot penned by the PwC Turkey’s Energy Sector Consultancy, focusing exclusively on the mergers-and-acquisitions in the energy sector, has displayed that the last year performed better even than the optimistic forecasts, generating a significant volume. In the report, it was emphasized that the tendering for the privatization of the Seyitömer thermic power station, E.ON’s EnerjiSa investment and the privatization tenders for the Boğaziçi (“Bosphorus”), Gediz and Akdeniz (“Mediterranean”) power distribution companies had constituted a bulky portion of the aggregate transaction portfolio. During February of this year, bids are anticipated to be received for Istanbul’s Anatolian Flank, the Toros (“Taurus”) region, Dicle (“Tigris”) and the Lake Van regions.

Gazprom’s Onslaught

Comparatively fewer transactions were witnessed in the petroleum and natural gas segments, in comparison with the electricity realm. The most important transaction in these sectors during 2012 was the disinvestment and offering of the 10.32% public stake in Petkim through privatization. On the other hand, the Russian energy giant Gazprom has solidified its status among the privately-owned gas suppliers by acquiring a 60% stake in Avrasyagaz.

The report has noted that a number of small-scale agreements were anticipated in the petroleum market during the course of 2013, adding that the sector participants had required ample time in order to adjust their overall operational standing to the regulatory changes and amendments destined to the fuel and LPG sectors.

The interest displayed by the large Turkish corporations in the privatization projects has manifested itself in the local-foreign distinction and breakdown in the agreements. The report, in that area, registered that the foreign and non-resident players had exhibited lackluster enthusiasm to the privatization tenders while showing a propensity to forge partnerships with local and resident enterprises, and that the most recent example of such collaboration was German E.ON’s takeover of 50% of EnrjiSa’s equity. Along with this transaction, the most notable agreements and contracts concluded in 2012 signified Socar’s purchase and acquisition of the 10.32% stake in Petkim, on top of the controlling 51% share; a Gazprom participation, Prima Energy’s acquisition of the 60% share in Avrasya Gaz and Inter RAO’s takeover of Trakya Elektrik.

Success Prospects in Privatization Has Intensified

Faruk Sabuncu, who is the PwC’s Turkey Energy Sector Leader, provided the following comments on the contents of the report: “In contrast to the previous failing privatization tenders in the past, we perceive that the transfer process involving the electricity distribution companies will be successfully terminated within 2013. The fact that tangible regulatory moves have been introduced in favor of the distribution companies and the low transaction values derived from more appropriate evaluation conducted pertaining to the financial structures of the target companies and the better assessment and a more realistic approach to the growth potential alternately enhance the success prospects of the tenders.”

İGDAŞ Is In the Pipeline

Engin Alioğlu, also from PwC Turkey, declared that, “the privatization transactions will continue to impact the overall transaction environment also in 2013. The privatization procedures relating to the Istanbul Anatolian Flank and the Toros region will be easy. However, the high ratio of loss-and-pilferage in the Dicle and Lake Van distribution regions may pose some impediments to the process. Moreover, we surmise that the process will also commence for İGDAŞ, almost immediately after the BaşkentGaz venture is phased out. And, finally, the investment tipped by the Abu Dhabi company TAQA for the Afşin-Elbistan electricity plants as well as the investments planned for the lignite ores are candidates to stand out prominently as the most eye-catching transactions of 2013.”