Thursday, June 17, 2010

Followup after HEPP privatisations

Dear Colleagues

A foreign colleague of mine who is well aware of Turkish energy markets called me and asked me the logic of unreasonable pricing of the last Hydro Electric Power Plant (HEPP) privatizations. He was very surprised to see the figures, unit prices of the sale. Was it weird, unreasonable, or even absurd??

These HEPP plants were built 30-40 years ago under local power needs with smaller capacities. They have bigger output capacities based on the flow of the water they have. In other words these hydro power plants can generate much more Kwe capacities if renewed. Therefore the money is given to the river not to the plant they purchased. The hydro power plants will be renewed with bigger capacities in near future.

It has also been a reality-check with fellow investors and "competitors" of similar background/targets. Bidding process was simply an excersize of balancing "risks of a new investment" and "risks of an old and poorly maintained facility". However some bidders looked at the issue from a different perspective. Afterall we all spent some time trying to make sense of the offer prices but could not see the logic behind the average price of 6 mio$/MW. Congratulatios are for, the successful bidders, of course, for taking great risks, and the Privatization Administration.

There is one other explanation which is nothing to do with economics, nor with competition. Could we think of a sort of simple money laundering, cleaning the informal/ unregistered income with some legal terms??

He was so surprised for such possibility of a simple reasoning. He will be writing these interpretations without giving my name in his recent FT article,

I told him that I will not be displeased if he would not give my name as his reference in his article. Do you have any other explanation to mine, a different one, or an alternative one ??

Your comments will be highly appreciated

Best regards

Haluk Direskeneli


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