Turkey tenders Baskent and Sakarya power grids for $1.825 billion

Austrian power giant Verbund and consortium partner Sabanci have won the bidding in tenders to privatize Turkish electricity supplier Baskent EDAS (BEDAS).

The consortium of Verbund and Sabanci would pay $1.225 billion for 100 percent stakes of Baskent, which supplies 10 terawatt hours of electricity to 2.9 million customers in and around the Turkish capital of Ankara.

Four companies or consortia bid in the Baskent power tender including Dogan Holding, Hema Endustri Corp, Akcez consortium, and Park Holding. Â

In the second tender, Akcez consortium offered the highest bid for the bargaining for the block sale of Sakarya Electricity Distribution Corporation with $600 million.

Executive Board Chairman of Akkok Group, a partner in the winning consortium, Mehmet Ali Berkman said this privatization was an important step in regard to a solution to the electricity problem of Turkey.

Turkey's first auction of power grids attracted just two foreign utilities firms, compared with at least eight that planned to participate in 2006, as the increased political uncertainty in Turkey added to the deteriorating global financial conditions. Another negative factor effected the tender was the electricity-price cap. Â

Turkey, aiming to avert shortages as capacity fails to match rising demand, also gives great importance to these power grids auctions as a way to raise cash to offset the country's trade deficit estimated to increase to 32 percent. Turkey's state asset sales are aimed at easing a current-account gap, the widest measure of trade in goods and services, that may reach $50 billion this year as oil and food prices surge.

Declining foreign interest in the power grids increases investor concerns that Turkey may struggle to sell power plants and its first nuclear energy license.  Â

The government raised the price of electricity for residential use by 22 percent, and the price of electricity for industrial use by 21 recently. The price hikes, part of an overhaul of Turkey's electricity pricing mechanism, is seen as an important step for the privatizations of electricity distribution and production assets.

The government, which sold a natural-gas grid in Ankara for $1.61 billion in March, hasn't said how much it targets for the two networks currently available. The government promised the International Monetary Fund it will reduce the state's more than 80 percent share of the electricity generation and distribution markets. The Ankara and Sakarya grids together have 4.2 million customers who consume a combined 18 million gigawatt-hours of electricity.

Next up for sale are power grids covering the central Anatolian region of Meram, and Aras in the east. The grid sell-off had been due to start in 2007 but was put off until after a parliamentary election that year.