July 22, 2008

Turkey Makes Progress in Power Sector Liberalization

The Turkish government is making progress on its ambitious plan to privatize and transform the country's choked power industry with new agreements and incentives for investment, according to The Wall Street Journal.

The rapidly growing Turkish economy faces challenges on account of the availability of electricity. The National Energy Forum of Turkey, an industry think-tank, estimates an investment of $125 billion over the next 12 years to cope up with the growing demand.

Industry sources have said that bickering in the country's political circles and an uncertain investment climate brought about by regulatory instability are the main concerns to investors who are seeking a fully-liberalized energy sector.

Observers have pointed out that the Turkish government is taking steps in the right direction. In July 2008, Austria-based Verbund and local partner Haci Omer Sabanci Holding successfully bid to own and operate the regional electricity distributor, Baskent EDAS, for $1.23 billion. Another reported success in Turkey's privatization drive is the successful bid by Akcez joint venture, formed by Ak Enerji and the CEZ Group, to operate the power grid in the Sakarya region.

The Turkish government is also divesting regional power grid operators along with power plants, and is inviting bids for new energy infrastructure. This includes the request for bids for the country's first nuclear power plant on its Mediterranean coast and possible bids for a second such nuclear facility on the Black Sea coast, according to The Wall Street Journal.

Turkish power producers and investors are expected to benefit from the introduction of computerized price-adjustment apparatus, which allows utilities to reflect the actual cost of production. The Turkish government has also introduced incentives such as a five-year 50% transmission charge waiver for companies that bring new generation capacity online by 2012, in a bid to ramp up capacity in the short-term.