Government’s Expectations for High Income from Energy Privatization Fail

The minister said he had a meeting with the winners of last year’s electricity distribution grids across the country over the weekend as Park Holding announced its decision to withdraw.

The government’s expectations of high income from the vast energy privatizations last year have failed to emerge with top bidders unable to afford to pay the amounts promised.

Park Holding, the top bidder for Akdeniz Elektrik, the electricity distribution grid in Turkey’s Mediterranean region, has announced that it cannot afford the amount demanded as part of the privatization process.

The top bidders for the Istanbul Anadolu ve Rumeli, Toroslar, Dicle, Gediz and Trakya grids have also demanded extra time to make their payments, said Energy Minister Taner Yıldız. The due date for payments for these grids is May 31.

Park Holding offered 1.1 billion Turkish Liras and paid $10 million in security.

The second highest bidder, Sabancı Holding, will continue the process, Yıldız told an energy panel Tuesday in Ankara.

The minister said he had a meeting with the winners of last year’s electricity distribution grids across the country over the weekend as Park Holding announced its decision to withdraw.

Following the extra time request from the remaining companies, the country’s Privatization Board demanded an extra security payment, the minister said.

The amount of this payment would be made public after the payment due is over, he added.

The failure in the privatization processes of the energy grids is causing an important loss in the country’s budget. The total amount of payments outstanding on May 31 was $6.2 billion, more than half of the total income expected.

MEKA Makine, a joint venture between businessmen Mehmet Kazancı and Mehmet Emin Karamehmet, failed on May 9 to make the $1.21 billion payment for the purchase of the privatized Başkent Doğalgaz, the natural gas grid in the capital city of Ankara. MMEKA Makine also committed $4.8 billion to the privatization tender of two electricity distribution grids in Istanbul.

Still, the problem will not create a significant damage on the government’s budget balance, according to Banu Kıvcı Tokalı of Destek Securities.

“The general outlook of the budget is positive despite the country being in an election period,” she said, adding that a recent reconstructing in tax debts to the government was putting the budget into balance.

The country’s high growth rate will also support the budget as the additional tax income of the government is rising, according to the economist.

“The real problem of the government is not the budget balance but the current account deficit,” she said.

Despite the delay in payments, the government was expecting a high income out of privatizations this year, said economist Mustafa Sönmez, adding that the current risk was not concerning.

Due to the heating economy, the Value Added Tax, or VAT, and Special Consumption Tax, or SCT, incomes of the government will help the budget remain in balance, he said.

May 24, 2011
SOURCE: TURKISH DAILY NEWS