Turkey Raises $5.76 Billion in Sale of Power Grids

Turkey raised $5.76 billion from auctions of four electricity grids, including the network on the European side of Istanbul, the country’s biggest city.

That auction and another for the Western city of Izmir were won by a venture between Iskaya Insaat, an Ankara-based builder, and MMEKA Makina Ithalat Pazarlama AS, an Istanbul-based company controlled by Mehmet Emin Karamehmet, former chairman of the country’s biggest mobile phone company. Ahmet Aksu, head of Turkey’s asset sale agency, conducted the auctions in Ankara.

Turkey is selling 20 regional electricity distribution networks to boost investment in the industry and help reduce debt. The government aims to collect 10.4 billion liras ($6.9 billion) this year from sales of state assets that also include rights to operate roads, bridges and the national lottery.

The $2.99 billion winning bid for Istanbul was two-thirds higher than the benchmark price per unit of power consumption set in previous Turkish grid sales, said Koray Pamir, an analyst at the Istanbul-based Ata Invest brokerage, in an e-mailed note. That is “likely to exceed the market’s expectations, thus translating into positive sentiment for privatization revenues and Turkey’s budget performance,” he said.

The government had raised $2.7 billion since November by selling seven regional power networks before today. The largest of those was the grid in the capital, Ankara, bought by Enerjisa Elektrik Dagitim AS, a joint venture between Haci Omer Sabanci Holding AS and Austria’s Verbund AG, for $1.23 billion.

Largest Grid

The Iskaya-MMEKA group beat off nine rival bids from companies including Enerjisa and Turkey’s Cengiz Insaat. The venture pulled out of the third auction, in the northwestern region of Thrace, which was won by Istanbul-based energy company Aksa Elektrik Perakende Satis with a bid of $622 million. The fourth grid, in the southeastern Diyarbakir region, went to Turkish companies Karavil and Ceylan Insaat for $228 million.

The European Istanbul grid has 3.8 million users, making it the country’s largest. Iskaya-MMEKA bid $1.92 billion for the grid in Izmir, Turkey’s third-largest city, which has 2.4 million subscribers. It will operate both networks until 2036.

Mehmet Kazanci, a former director of Aksa Enerji Uretim AS who is Karamehmet’s partner in MMEKA, told reporters that there’s an “initial investment need of $50 million” for the Istanbul grid. He said the group will seek credit from domestic and international banks to help finance the purchases, and is considering paying the fees in installments.

Jail Sentence

Karamehmet was ousted as chairman of Turkcell Iletisim Hizmetleri AS in February after he was forced to reduce his stake in the phone company in order to pay debts to the government stemming from the failure of one of his banks. In February he was sentenced to 11 years and eight months in jail on charges of fraud related to lending by the bank.

Karamehmet is appealing against that verdict. He also has interests in oil production in northern Iraq, carmaking and media, and was Turkey’s richest man in 2007 according to Forbes magazine.