David O'Byrne in Istanbul -

Ordinarily, news that one of the world's biggest energy companies was pulling out of a profile joint venture in an emerging market would - at least in the market concerned - rank as front page news. But with Turkey roiled daily by reports and leaked tapes of widespread corruption at the highest level, the news that GE Energy Financial Services, a wing of US giant General Electric, is selling its 50% stake in Gama Enerji to its Turkish partner barely registered as a headline.

This despite Gama Enerji's portfolio of around 200 megawatts (MW) of generating capacity, 875MW under construction and another 255MW under development making GE one of the biggest international investors in the Turkish power sector.

Although GE itself has yet to comment on the sale, Gama Enerji itself confirmed two weeks ago that it has commenced regulatory procedures to buy out its partner, albeit with the caveat that the two will continue to examine new opportunities.

The scant coverage though does not reflect lack of interest in energy matters in Turkey - in fact, the opposite is true. Official figures predict growth in Turkey's energy demand averaging 7% a year over the next decade, requiring a total investment in excess of $120bn.

Rather, GE's decision to exit has been overshadowed by reports concerning the activities of other Turkish companies active in the energy sector, which have come to light in the wake of the corruption investigations launched in December.

Those investigations saw numerous arrests including Mehmet Cengiz, chairman of Cengiz Holding, one of Turkey's biggest construction and energy groups, and the CEO of Halk Bank, the bank used to process Turkey's payments for oil and gas imported from Iran, with several other prominent businessmen with energy sector interests called to give evidence.

Turkish Prime Minister Tayyip Erdogan has denounced the investigations as politically motivated. But with Turkey heading into municipal elections at the end of March, the allegations of graft have been reinforced by the leaking onto the internet of a series of apparently illicitly recorded phone conversations involving senior politicians including the PM and a number of leading businessmen with major investments in the energy sector.

The veracity of the leaked recordings has not been verified. Erdogan himself has denounced some as "montages", but has also confirmed that others are genuine. While at least two of the businessmen whose voices are alleged to feature on many of the recordings are reported as facing legal actions as a result of statements attributed to them.

Who's Who in energy

Those whose voices allegedly appear on the recordings read like "Who's Who" of the Turkish energy sector. They include the chairmen of big players Cengiz, Limak and Kolin, who between them control around 20% of the Turkish power distribution market, as well as owning individual portfolios of power plants, and the chairman of Kalyon group, which in consortium with the first three last year won the right to develop Istanbul's third airport with a massive bid of €22.1bn.

Many of the discussions in the recordings concern the planned purchase, by a consortium of some or all of the above, of a media group owned by yet another Turkish company with major energy interests, Calik Group - a buyout apparently brokered by Erdogan and close family members. Calik's energy interests in Turkey include a portfolio of power plants and a regional power distribution company, as well as plans for two major oil pipelines terminating at Turkey's Mediterranean oil hub at Ceyhan, where Calik still plans to construct a refinery and petrochemical plant.

Several other prominent energy plays have also found themselves mentioned in the recordings, which are still appearing on an almost daily basis and disseminated via Twitter and other social media. On March 20, Erdogan threatened to ban Twitter and, indeed, on March 21 the service appeared to have been blocked.

As with those mentioned above, it is unclear whether the recordings can be verified or whether in fact any crimes have been committed, but the constant stream of allegations does little to improve confidence in the country's energy sector. And GE is not the only company to recently distance itself from energy projects in Turkey.

Taking their leave

Last year saw Spanish power giant Iberdrola sell its Turkish wind power portfolio, while in December Statoil and Total announced that they would not take up the invitation to join Azeri state oil company Socar, Turkey's Botas and BP in the consortium developing the Azeri-Turkish TANAP gas pipeline to carry gas from Azerbaijan's Shah Deniz field to Europe. BP for its part, has yet to sign off on its agreed 12% stake in TANAP.

And Socar suffered a further blow on March 17 when the European Bank for Reconstruction & Development and World Bank's IFC announced they were pulling out of talks to finance their planned $5.5bn refinery complex near Izmir.

While there is no suggestion that any of these events are directly related to recent events in Turkey, taken together they hardly inspire confidence in a sector desperate to attract international investors and finance to meet rapidly growing demand. "This unstable situation means we will face significant problems in the energy sector both for foreign investors and local investors there will be delays to major projects," warns Necdet Pamir, chairman of the energy committee of the main opposition Republican People's Party.

With around 18 months before scheduled general elections, Pamir is hopeful that the coming local elections will provide the impetus for a shake-up in the ruling Justice and Development Party. "Erdogan and his close circle will go but we don't know what will replace them," he says pointing out that the current uncertainty has also hit the Turkish lira and has left Turkish consumers with higher energy bills - a factor which may yet prove significant in the coming local elections and next year's general election.