David O'Byrne in Istanbul -

Privatisations in Turkey seldom go completely according to plan and the ongoing sell-off of the country's 21 regional power distribution companies has been no exception.

The sales of the first 14 were relatively straightforward, with sale prices broadly in line with expectations. However the sales of the final seven operators - including three of the five biggest - conducted in the second half of last year resulted in what some analysts have described as a "feeding fest", because Turkey's major corporations bid aggressively against each other in an effort to build distribution portfolios from the few remaining unsold companies.

These sales were further complicated by monopoly issues when Turkey's competition board ruled that two of the successful bidders - Aksa Enerji and MMEKA - should be considered as one entity due to their both being co-owned by members of the same family.

The final accepted bids were: $2.99bn by a consortium of MMEKA and IS-Kaya Insaat for Turkey's biggest distribution company Bosphorus EDAS, which distributes power in the European side of Istanbul; $1.813bn from MMEKA for Anadolu Yakasi EDAS, Turkey's fifth biggest distributor, which distributes on the Asian side of Istanbul; $2.075bn from Yildizlar SSS Holding for Turkey's second biggest distributor Toros EDAS, which distributes in the southern Turkish city of Adana; $1.922bn from a consortium led by Turkish silver mining group Eti Gumus for Gediz EDAS, Turkey's third biggest distributor, which distributes in Turkey's Aegean capital Izmir; $1.165bn from Park Elektrik for Akdeniz EDAS, which distributes power in the Antalya region: $622m from Aksa Elektrik for Trakya EDAS; and $228m from a consortium of Turkish construction groups Karavil Dayanikli Tuketim Mallari Insaat and Ceylan Insaat for Dicle EDAS, which distributes in the largely Kurdish region of Diyarbakir.

In total, a cool $10.bn - a figure widely regarded as a major coup for Turkey's Privatization Administration (OIB) and a major vote of confidence from the private sector in both the government's strategy of liberalising Turkey's power sector and selling off the country's power distribution operations.

Or at least it would have been had the OIB been able to conclude the sales.

Power outage

By May this year, it was apparent that all was not well, with the winning bidders for six of the seven requesting extra time to conclude finance agreements and Park Elektrik announcing that it would not go through with its purchase of Akdeniz EDAS, which was instead to be offered to second bidder Enerjisa - the joint venture of Turkey's Sabanci Group and Austria's Verbund. "The basic problem is that the prices paid are too high and the banks don't think that the purchases are feasible at these prices," explains Selim Kunter, energy analyst at Istanbul brokerage Expres Invest.

Kunter say the problem for the banks is that the purchases would need to be funded with project finance, which requires the buyers to put up 30% of the capital themselves, and this comes at a time when generally tight financing conditions prevail.

The high bids themselves, he explains, stem from the understanding that Turkey's energy regulator, the EPDK, was planning to raise the permitted margin for power distributors from 2.33% to between 4-5% - a move which by early this year the regulator had announced would not happen.

Further problems ensued as the winning bidder in two tenders, MMEKA - a consortium founded by two of Turkey's most prominent businessmen - fell apart with one of the two, Mehmet Kazanci, publicly accusing his erstwhile partner Mehmet Karamehmet of duplicity.

By July, only the consortium buying Dicle EDAS had succeeded in making a down-payment and it was clear that most bidders were in serious trouble - unable to raise sufficient finance to complete their purchases, but unwilling to pull out and hand a prized purchase to a rival.

Confusion reigns

But while the OIB and the government insisted no further time would be given and the distributors would be offered in turn to each company that submitted bids before being re-tendered, some ousted bidders protested, claiming their bids are still on the table. Mehmet Kazanci - apparently now divorced from his partner - vowed publicly to reverse the decision on the grounds that he had secured the $4.8bn he needed to buy Bogazici EDAS and Anadolu Yakasi EDAS from unnamed overseas sources.

Further confusion exists, as most of the bidders submitted bids for several companies and as higher bidders are eliminated, find themselves offered the chance to buy another distributor, which they may or may not be able to finance. Such is the case of Enerjisa, which having been refused extra time to arrange purchase of Akdeniz EDAS, has now apparently as second highest bidder been offered the chance to buy Gediz EDAS, but as third highest bidder for Anadolu Yakasi EDAS will also be in line to buy that company if second-placed Eti Gumus fails to secure finance.

Confused? Then pity the poor Turkish electricity consumer, who is being forced to watch such a soap opera played out in the media, while struggling to meet power bills that have risen drastically over the past decade.

Little wonder, then, that so many choose not to pay. Power theft in some regions of eastern Turkey is reckoned to be running at up to 70% of power distributed, while in Turkey's richest city of Istanbul, Bogazici EDAS has been forced to open legal proceedings against more than 300,000 of its 3m customer base.