February 4, 2013 4:50 pm

Turkish PM casts doubt on roads deal

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Turkey’s prime minister has cast doubt over the future of the country’s second-biggest privatisation, which includes Koç Holding, Turkey’s biggest conglomerate, and Malaysia’s UEM in the winning consortium.

Recep Tayyip Erdogan has suggested Ankara could get more than the $5.7bn the consortium bid in December for a 25-year concession for 1,975km of roads and two heavily travelled bridges over the Bosphorus.

“We will perhaps cancel some privatisations,” Mr Erdogan said. “For example, we will put highways and bridges on the table again; we have got higher expectations.”

Mr Erdogan’s remarks could have larger consequences for infrastructure finance at a time when Turkey has growing ambitions in the field and is trying to overcome a patchy record of success in previous privatisation auctions.

Ankara is planning to hold a tender in May for what it intends to be one of the biggest airports in the world – a new six runway hub in Istanbul – and Mr Erdogan also wants to proceed with plans for a new canal to circumvent the city.

Michael Davey, Turkey director for the European Bank for Reconstruction and Development, said the country’s infrastructure needs could total between €200bn and €400bn during the next decade, and highlighted the importance of the roads and bridges concession.

“We see it as a transaction that could be financed relatively quickly,” he said. “It would be a good message to the market. The more large prominent deals that you see financed the easier it is; the better the perception is.”

But Mr Erdogan indicated late last week dissatisfaction with the size of the winning bid when compared to the revenues the roads and bridges already generated.

Shares in Koç – which, like UEM, has a 40 per cent stake in the consortium – edged down just over 1 per cent on Monday afternoon. Shares in the smaller and less diversified Gozde, the private equity subsidiary of Turkey’s Yildiz Holding conglomerate that holds the remaining 20 per cent, fell 7 per cent.

People close to the companies said they had not received formal notification of any change of tack by Turkey. “The formal process of privatisation is going on at the privatisation high council and we are carefully following the process,” UEM said.

The deal, which has yet to be approved by Turkey’s competition board, is important to UEM – owned by Khazanah, the country’s sovereign wealth fund – because it would be its first foray outside its core markets of Malaysia, India and Indonesia.

Izzaddin Idris, UEM chief executive, said when the tender result was announced in mid-December it was “a significant milestone” for the group.

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