Turkey postpones electricity sell-off

Vincent Boland in Ankara
Published: January 10 2007 Financial Times

The Turkish government yesterday postponed the privatisation of parts of the country's electricity distribution network amid fears that it would lead to higher prices for consumers in a general election year.

The announcement confirmed speculation ignited last week by Recep Tayyip Erdogan, the prime minister. During a trip abroad, he unsettled some of his cabinet colleagues and the financial markets by suggesting that the sell-off might be too politically sensitive as Turkey nears polls, scheduled for November.

Hilmi Guler, the energy minister, said yesterday that the privatisation of three distribution companies, including one in Istanbul, would not take place before the election. "We don't want to address such a vital issue as electricity privatisation in a rush," he said. Local reports said the sell-off could have raised about $3bn (€2.3bn, £1.55bn).

The privatisation was not a condition of Turkey's $10bn loan agreement with the International Monetary Fund, and IMF officials in Ankara would not comment yesterday. But its postponement may fuel concern that the government's commitment to structural reform, including ending distortions in electricity pricing, will weaken during what promises to be a bruising election campaign.

Turks already pay some of the highest prices in the world for energy, especially petrol.

Uncertainty about the government's intentions added to pressure on the Turkish financial markets, already buffeted by global trends in recent days. Stocks fell a further 2 per cent yesterday. Observers said the decision to postpone was a sign of how politics was starting to dominate the agenda this year after four years during which the focus was on stability and structural, social and political reforms.

Parliament is also due to elect a new president in May. There is intense speculation about whether Mr Erdogan will stand for the post. If he does, it could undermine any chance his ruling, neo-Islamist Justice and Development party (AKP), in office since late 2002, has of winning a second overall majority in the parliamentary election.

Mr Erdogan has said he will not make his intentions clear until mid-April, when candidates must be named. A dispute is already raging among the government, the opposition and the judiciary about the constitutional procedure for electing a president. This has added to the brittle political mood in Ankara, which in turn is beginning to affect the mood of business and investors in Istanbul.

Business leaders have begun saying in public that Mr Erdogan should remain at the helm of the government, which has been Turkey's most pro-business administration in 20 years. Political observers said ministers did not want to lose that reputation but may give freer rein to populism in the next few months.

Financial analysts said the 2007 budget was cautious on privatisation revenues, suggesting that abandoning the electricity deal would not unduly affect the wider sell-off programme.

The Financial Times Limited 2007

Corporate Communication in Modern Times

Dear Colleagues,

I do not like to send "forward" messages. I like to write what I feel and the way I think. I do not scare the keyboard. My subjects are generally on "energy, petroleum, gas, sales, customer relations, thermal power plants, design softwares, and my past experiences in business life".

Maybe you already know that I am 1973 mechanical engineering graduate from the Middle East Technical University in Ankara Turkey. I worked as plant construction engineer for first 10 years in a public owned heavy machine works just after my graduation. So I learnt the thermal power plant- steam boiler business from the very beginning. Then I worked for next 20 years in local and international companies in design, proposal, sales and marketing activities at various levels.

Since 1999, I serve the local market in thermal power plant design software services. It is my sincere feeling that it is a must to have local design activities for local thermal power plants. There is no difficulty nor any need to scare from design activity in the local market. All parties are using the same international design softwares. There is almost very limited in-house design software development in companies, almost negligible or unimportant. Reputable companies in USA, UK, Europe, in Japan are now too expensive in the international market competition. Newcomers are companies from China, India, Korea, Pakistan, and from other Far East countries using the same international basic design softwares.

We have capable qualified young engineering power no less than other developing countries, matching the best high world standards. We need to leave the existing conventional Turkish scope of raw Labor supply covering "civil works and site installation" activity which has very low value added scope and very low profit margins.

If we do not use these young bright new engineering generation, due to their dissatisfaction they will soon leave the country and work in foreign lands although for all their life they will be facing discrimination.

Now let us come to the subject of today. You may first react that this is nothing to do with our energy business. That is something to apply, that is something to apprehend and evaluate in your day -to- day business.

We have many big corporate in our local market. You know them all very well.

They all have web pages. There they all have communication information. When you access their communication information page, the most of the time you find no name, no e-mail address but a simple small box to fill in what you ask. First you supply all your private information. Then you have to put all you ask into that small box.

They think that they know everything within their own staff level.

They do not need your evaluation, presentation, communication.

Then that request will be under the mercy of some administrative assistant, and most probably scraped by "delete" button of their keyboard. You never reach to whom you have to.

Last week, I entered to web site of one of big local corporate. Since I know their top person from newspapers, TV, other media sources, I put his name on top of my message as follows,

Quote

Dear Sir

Since Turkey will face a serious energy supply crises in next few years, big/ small many companies started to make business efforts for their own power plants whether or not they know energy business. They applied to Energy markets Regulatory Board of Turkey for licensing of their new energy projects. Upon receipt of their licenses, they went to international markets to find investors, contractors, partners. There is almost none. Now they look for their own solutions. Your corporation had also many plants which need electricity. We understand that you have no power plant to supply your own electricity. Your plants will stop working, if you do not install your own energy power plant. You need to have new investment initiatives. You are spending your money for some unnecessary business activities, building new shopping malls, etc. You should start to have your own plans. For thermal power plant design activities, I can serve your corporation. Please advise

Unquote

After one week, an e-mail message appeared on my PC screen

"Your message is received. Thank you for your comments. Signature- Corporate Communication Coordinator"

It is like a message from a machine, from an android, from outer space. I could not evaluate the response. You may say that in this world of spam, junk mail bombardment, it is obvious defence for a corporate. But that is too much. you can not reach any human being in the modern world.

Phone respond in prerecorded machine messages. Web sites respond again with pre- written messages. You can not reach any one in the corporate world. Even you do, those administrative assistants will never let you reach our contact point. The security guards will never let you in, even make you very sorry that you came to their main corporate gate.

Even staff in the smaller companies apply the same procedures. "Do you have an appointment?" - Even if you have- They have no time to listen to you.

I do not know where we shall go to with that isolated, insulated world of corporate management. If I can reach someone via his/her cellular phone, or if his/her e-mail is responding, then I make business with them. For others, I do not care. Let them do what they want. Your further comments are always welcome

Turkish Power Grid Tender

Turkish Finance Minister Kemal Unakitan said on Friday he knew of no plans to cancel a tender for the sale of three electricity grids, in comments that seemed to contradict the prime minister.

The sale which is part of Turkey’s IMF-backed privatization program, has attracted strong interest from some of Europe’s biggest utilities.

Turkish newspapers quoted Prime Minister Tayyip Erdogan on Friday as saying he did not want to press ahead with energy privatization for now because voters would blame the government for higher electricity prices. Turkey faces elections in 2007.

Asked about the reported remarks, Unakitan said: “I have not spoken with the prime minister. I have no information regarding his words about electricity privatization.”

“There is no cancellation decision at the moment on the electricity distribution tenders,” he told reporters, adding that he expected to discuss the issue with Erdogan in the next few days.

Companies interested in buying the grids must submit their bids on January 19. The grids serve the capital Ankara, the Asian side of Istanbul, Turkey’s business hub, and the land between the two cities.

A senior Energy Ministry official told Reuters on Friday any cancellation of the sale would harm Turkey’s image and erode the trust of foreign investors.

“Whatever the actual words used (by Erdogan), they must not include the three grids(slated for sale),” the official said. Newspapers quoted Erdogan as saying, on a flight home from a trip to Lebanon: “We are not thinking of energy privatization at the moment. If we leave electricity distribution to private hands, citizens will blame us when prices go up.”

An official at Erdogan’s office confirmed the prime minister’s remarks but could give no further details. Turkey’s privatization administration had no comment.

The sales of grids are partly aimed at reducing illegal electricity consumption, which is estimated to account for about 19 percent of the country’s output.

A total of 37 companies and joint ventures have applied for pre-qualification in tenders for the sale. These include Italy’s Enel, Spain’s Iberdrola, France’s Suez-Tractebel, AES of the United States, Germany’s E.ON and Edison-SpA.

(Reuters, 05/01/2007)