Turkey eyes $10 bln from sales
The privatization processes for the Turkish national lottery (Milli Piyango), the country's highways and sugar processing plants are expected to begin in July, however Halkbank's privatization has been suspended, says the head of the Privatization Administration (ÖİB).
ÖİB President Metin Kilci, in an interview with Anka news agency, said the ÖİB was waiting for the relevant bills to pass in Parliament for the launch of the privatization processes for Milli Piyango and highways.
Milli Piyango's privatization -- a process long seen as stagnant after deferral due to early elections and a subsequent presidential vote last year -- was postponed from May until June. The bill enacted to open tenders for the privatization of Milli Piyango was recently approved by a parliamentary subcommittee, while the bill on highway privatization is still pending in Parliament. Kilci stated the privatization processes for Milli Piyango and highways would be launched one week after the relevant bills are published in the Official Gazette. The government expects to gain $5 billion in revenue from the privatization of the lottery and sugar factories and another $5 billion from highway privatization.
"The operating rights for Milli Piyango will most probably be transferred to private enterprises for 10 years. Twenty percent of Milli Piyango's proceeds are transferred directly to the operating enterprise. After the privatization process, 3 percent of these proceeds will be transferred to the Milli Piyango Administration and the remaining 17 percent will be transferred to the company that becomes the preferred bidder in the privatization process. However the whole of this 17 percent is not profit; it includes operating costs as well. Milli Piyango's proceeds in 2007 were around YTL1.5 billion. Seventeen percent of this sum is equal to YTL 255 million. If we take the fact that the Milli Piyango operating rights will be transferred to bidder enterprises for 10 years into consideration, we can conclude that these companies will compete during the privatization process for revenue of YTL 2.5 billion for 10 years," stated Kilci.
He also noted the ÖİB would require enterprises to compete in Milli Piyango's privatization to fulfill a series of prerequisites. "Bidding companies will have to pledge that they will have the technical proficiency to exploit Milli Piyango. We need to take bidder companies' technical proficiency into consideration for Milli Piyango's effective exploitation. We can't expect the companies to have the required technical proficiency at the moment, but they have to pledge that they will have it in a certain period of time," remarked Kilci. Kilci also said Turkey planned to privatize its highways and the Fatih Sultan Mehmet Bridge in İstanbul, transferring their operating rights to private enterprises for 25 years.
"We don't plan to privatize the Bosporus Bridge at the moment. All highways, along with the Fatih Bridge, will be privatized. We have more than 2,000 kilometers of highways and 72 highway maintenance stations. The tender process for the highways is expected to be completed before the end of this year and the transfer of their operating rights will be completed in the upcoming year," he said.
A number of large international companies have already expressed interest in the highways privatization process. Macquarie Infrastructure of Australia, Abertis of Spain, Brisa of Portugal, Itochu Corp. of Japan and Atlantia of Italy are just a few among these.
Noting that they would seek competency criteria, financial ones in particular, in highway privatizations, Kilci said: "We will seek financial power, because this will not be a process limited to operating. Certain investments will be obligatory. Not in terms of experience, but certain financial and technical prerequisites will be sought. What I mean by technical is that the bidders should have done highway constructions before, rather than operating them."
‘25 sugar processing plants in six packages’
Kilci also stated that they would begin the tender process for sugar processing plants in the next month, adding that they would sell 25 sugar factories in six portfolios. He said they would take immediate action for the A, B and C portfolios, and would put the other three out for bidding in one month. The bids will be held at 10-day intervals, he also said. The ÖİB president emphasized that they would employ the "sale of assets" method for the first time in the privatization of sugar factories, adding that they would not divide the portfolios amidst themselves, but that bidders were allowed to make offers as joint initiative groups for any portfolio and later divide it between themselves following the completion of privatization procedures.
The ÖİB president stressed that their foremost concern while forming the portfolios was quota integrity, noting: "We also took into consideration the issue of geographical distance, while focusing on quota integrity. Also of concern were the overall capacities of the factories included in the portfolios. That is, their possession of capacities that would make privatization worthwhile. The chief determinant here is quota. This will not only be privatization. It will also be a process that will bear a meaning for the sector in terms of rationalization. It's likely that the new owners of these factories will opt to reequip them; they will take steps to increase the production capacity in some, decrease in others, or change the direction of the production."
‘Market conditions not suitable for Halkbank sale’
Kilci stated that they had not yet made a decision on a privatization strategy for Halkbank. "Our current stance is that we want to present our recommendation to the Supreme Privatization Board (ÖYK) after completing an assessment in line with the market conditions. It will either be a public offering or a strategic sale. However as of now, we haven't made any recommendations to the government or the ÖYK, nor have we made any certain decisions," he said.
In response to the question of whether the global financial crisis had hindered the privatization of Halkbank, he stressed: "We are not concerned with whether a privatization is initially realized or not. Our main measure is the achievement of success. The completion of a privatization at a good and adequate price is important to us. We are devising a strategy considering all these parameters, and given the current conditions, it is out of the question for us to take any steps forward."
Ziraat Bank public offering
Kilci assessed Ziraat Bank General Director Can Akın Çağlar's suggestion -- based on his bank's social responsibility stemming from their engagement in the agricultural banking sector -- that Ziraat Bank be not privatized before agricultural loans become prevalent in the banking sector, that at most 10 to 15 percent of its shares be privatized when the right time comes and that this limited privatization be realized through public offering.
The ÖİB head said he agreed that the correct privatization strategy for Ziraat Bank was to begin the privatization with a public offering. "Ziraat is a major bank, and I don't deem it rational to privatize the entire bank at once. This is not a result springing from the specialization fields of the bank, and they are not reasons for not privatizing it. The subsidized loans allotted by Ziraat are covered from the Treasury, not from the resources of the bank. When the Treasury decides to provide a support in this field, it may well be done by some other banks too. The provision of this loan, to me, should not constitute a privilege for any bank," Kilci noted.
‘I'm really tired'
In response to a question over whether he was tired by five years at the helm of the ÖİB, Kilci said: "Well, we should come up with a correct term. 'Tired' would not be the accurate way of expressing my condition, but since I cannot seem to find a better alternative, I can say I'm tired. I'm really tired, and I don't mean a physical tiredness. We have had to hold tenders more than once in the privatization of some gigantic enterprises, such as the Turkish Petroleum Refineries Corporation (TÜPRAŞ), Turk Telekom, and Turkey's alcohol and tobacco monopoly (Tekel)." Also recalling that they realized the privatization of other major companies such as the Ereğli Iron and Steelworks (Erdemir), he said: "We have displayed very determined, persistent behavior. I think I have proved the power of the ÖİB."