While the bewildering effects of the world economic crisis are still lingering, investors aware that the fog is dissipating are gearing up to hunt big game again. For those watching Turkey closely, the Turkish privatisation authority's programme for 2010 seems a call to arms.
By amending the Regulation on the Privatisation Valuation Process and Tenders (Tender Regulation) on September 2 2009, the Privatisation Administration (PA) seriously boosted the public image of privatisations, badly battered by the global financial collapse. The amendment to the Tender Regulation enables the Valuation Committee of the PA to revalue privatisation transactions prior to the deadline for bid submission, and will also accelerate the privatisation process for institutions and facilities in the real estate and mining sectors that are to be privatised via methods other than asset sale and share transfer. The amendment is significant because economic conditions are changing with each passing day, and the Tender Regulation's main purpose is to harmonise the valuation process with the economic conditions prevailing on the day when bid offers are submitted.
Despite the gloomy first quarter of 2009, the Turkish economy is poised to recover in 2010. Many economists believe Turkey has already demonstrated its economic strength by surviving the months of turmoil without IMF assistance, an accomplishment expected to prompt an upgrade in Turkey's credit rating. In fact, Turkey has endured the credit crunch better than any other emerging economy in the world, a fact amply demonstrated by the survival of all Turkish banks. Moreover, economic revitalisation will keep the privatisation process fast-paced. The PA intends to conduct privatisation tenders quickly and in an orderly manner, as it has with the tobacco assets of Tekel, the largest asset sale conducted through privatisation to date, and the sale of 55% of Türk Telekom's public shares, which put Turkey in fifth place among OECD countries in privatisation transactions.
Recalling the previous attempt to privatise Turkey's state-owned National Lottery, which failed due to the high minimum price of $1.6 billion set by the PA as well as tax-related issues at the beginning of 2009, the PA plans to privatise the National Lottery (with an annual turnover of $683 million and net profits of $189 million in 2008) through licence transfer in 2010 for a period of 10 years. The PA is thus expediting the process by preparing a new model for the National Lottery tender, revising the tender offer to include more favourable conditions for investors.
And according to the press, Parliament will issue the Highways and Bridges Privatisation Law during the new legislative year. PA officials have said that they will launch the tenders to privatise various highways and bridges once the law is adopted. These include: (i) Edirne-Istanbul-Ankara Highway, (ii) Pozant¦-Tarsus-Mersin Highway, (iii) Tarsus-Adana-Gaziantep Highway, (iv) Toprakkale-Iskenderun Highway, (v) Izmir-Çesme Highway, (vi) Izmir-Ayd¦n Highway, (vii) Gaziantep-Sanl¦urfa Highway, (viii) Intercity Highways of Izmir and Ankara, (ix) Fatih Sultan Mehmet Bridge, and (x) Bogaziçi Bridge. Concession agreements will be executed to transfer the operating rights of Fatih Sultan Mehmet Bridge (located in Istanbul) and eight highways for a period of 20-25 years. The PA intends to complete these privatisations in 2010, and reap income of $5-6 billion.
There are also two major natural gas distribution facilities on the PA's privatisation agenda for 2010. One is Istanbul Gaz Dag¦t¦m Sanayi ve Ticaret AS (IGDAS), distributing gas to four million subscribers in Istanbul, and the other is Baskent Gaz, the gas utility with over 1.2 million subscribers in Ankara. With the aim of furthering economic competition and development, the PA plans to complete privatisation of these gas distribution facilities by the end of 2009.
Electricity distribution is on the PA's list as well. As per the statements of PA officials, there are 53 pre-qualification applications for Çoruh Elektrik Dag¦t¦m, Yesil¦rmak Elektrik Dag¦t¦m and Osmangazi Elektrik Dag¦t¦m, and this demonstrates investor demand for electricity distribution facilities. The final bid submission deadline was October 20 2009. However, interested investors that missed this deadline should not be too anxious. It will be followed by the privatisation of 11 other distribution companies in 2010.
Finally, a number of international institutions, investment banks and intermediaries are curious about the privatisation of public banks in Turkey. Even if no action is actually taken on the public banks, according to statements of the deputy prime minister of Turkey, the privatisation of shares of Ziraat Bank, Turkey's largest bank, will take place through public offering in 2010.
And investors contemplating dessert instead of an entrée may participate in the tenders for six sugar-processing plants owned by Türk Seker AS. The PA will privatise these via asset sale, and bidders are required to submit their bids in US dollars by November 19 2009. In sum, the PA seems determined to spice up 2010 with an all-inclusive privatisation menu.
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