EWE Seeks to Double Customers It Supplies in Turkey

EWE AG’s Turkey unit is aiming to double the number of customers it sells natural gas to as an expanding retail market may offer opportunities for acquisitions including the Istanbul grid.

The German utility, with experience in smart grids and efficiency, is positioned to compete in a market dominated by domestic companies, said Bekir Sami Acar, managing director of EWE Turkey Holding AS. EWE operates two gas grids in western and central Turkey serving 1.1 million users, or almost 12 percent of the country’s 9.5 million households, he said.

Since the start of this century, Turkey has sold 30-year operating rights to all the grids in the country, with the exception of the biggest, Istanbul. The nation is subsidizing gas and keeping tariffs low to encourage more of its 19 million households to switch to the cleaner fuel. Acar expects his customer base to double as a result.

“Turkey’s retail gas usage penetration should increase to 70 percent or 80 percent of the total consumers,” Acar said in an interview yesterday in Istanbul. “We believe there will be a consolidation in the market in the next five to 10 years as some operators unhappy over the regulator’s price tariffs may consider exiting.”

Istanbul’s gas grid is part of the government’s privatization program, Energy Minister Taner Yildiz said in June, without giving a time for a sale. The government sold Turkey’s second biggest network, in Ankara, to Istanbul-based Torunlar Enerji for $1.16 billion this year. Igdas, as the Istanbul grid is known, serves 4.8 million users as of end-2012, according to the website.

‘Big Bite’

EWE could be interested in bidding for Igdas with a partner if the macroeconomic conditions are right and under “viable tender terms,” Acar said.

“The Istanbul grid is a big bite for everybody and it may not be easily sold next year because there are local and presidential elections,” Acar said. “Also some uncertainties about the future tariff methodology need to be cleared.”

The energy market regulator sets a five-year gas tariff for each of the country’s 70 grids based on parameters including the network’s consumption, investment needs and expected revenues. Last year, the regulator renewed tariffs for most operators for the period through 2016.

EWE is also interested in taking part in gas imports to Turkey as Botas Boru Hatti ile Petrol Tasima AS, the country’s state oil and gas pipeline company, will gradually sell import contracts under a new draft law to amend the gas market legislation, Acar said.

“Our aim is to become a leading company in Turkey’s gas-distribution market as EWE has chosen Turkey and Eastern European countries as growth markets,” he said.

Before it's here, it's on the Bloomberg Terminal.