E.ON's EM strategy continues with ambitious new Turkish unit

By bne IntelliNews December 5, 2012

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In an illustration of shifting growth prospects within Emerging Europe, German utility E.ON's new Turkish unit Enerjisa said on December 4 that it is set to kick off a massive investment drive with the aim of grabbing an increased share of the electricity market in the country. Meanwhile, the German energy giant continues trying to offload assets in other markets, including Slovakia, Bulgaria and Hungary.

Following the announcement on December 3 of the completion of a long-mooted deal with Austria's Verbund to take over its 50% stake in the Turkish joint venture with local partner Sabanci Holding in exchange for eight hydropower plants on the Danube, E.ON CEO Johannes Teyssen told reporters of his joy in securing exposure to the "serious potential" of Turkey's rising energy demand, reports Dow Jones.

The German company aims to more than double Enerjisa's share of Turkey's power generation capacity to at least 10% of the market by 2020, expanding its presence in one of the world's fastest growing energy markets, he stated. Enerjisa had revenue of TRY3.7bn (€1.58bn) in 2011. Turkey is targeting TRY200bn in energy investment by 2023 to meet the growing demand for electricity being fueled by economic growth averaging 5.5% over the last decade. "In Turkey we found exactly what we wanted - a stable market with an interesting growth perspective and a superb partner which is well established," Teyssen eulogized, according to Reuters.

Enerjisa plans to invest €2.5bn to raise its installed capacity from 1.8 gigawatts (GW) to over 5.5GW by 2017, reports Erste Bank, through ongoing and licensed projects. That level of investment is in stark contrast to the German company's strategy in other emerging markets and those closer to home, but echoes moves to increase its foothold in the larger developing nations around the globe. Teyssen noted that E.ON's move into Turkey follows an agreement in January to buy a 10% stake in Brazilian group MPX Energia. The German giant has also been deepening its investment in Russia, where it has generating capacity of 10.5GW and works closely with Gazprom.

However, investment in other parts of CEE is in the process of being pulled as part of a massive divestment strategy caused by a growing debt burden and accelerated by the shutdown of Germany's nuclear power stations in the wake of the Japanese disaster in early 2011. The bid to unload €15bn worth of assets by the end of next year has seen it sell businesses in the US, UK, Sweden and Germany. In CEE, it sold out of its Bulgarian power distribution unit in June. It is also reported to be close to selling its gas distributors in Slovakia and Hungary. While the latter sale is being pushed primarily by the Hungarian government, analysts suggest the German giant is probably perfectly happy to leave.

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