Mergers and acquisitions exceed USD 2.8bn in energy

The estimated value of mergers and acquisitions (M&A) in the Turkish energy industry rose by 155% to over USD 2.8bn in 2021,  according to the ‘Mergers and Acquisitions in Turkey’s Energy Sector 2021’ report, prepared by the independent audit, tax, and consultancy company, PwC Turkey. 

There were a total of 40 M&As in the country’s energy sector last year. 

The report demonstrates that foreign investors’ interest in the Turkish energy market, which declined in 2020 with the adverse impact of the pandemic, didn’t show a significant improvement in 2021. 

However, it also underlined that the foreign interest continues and pointed out the need for the country to become a reliable hub for domestic and foreign investors. “The energy management sector should develop long-term strategies instead of general election-driven policies,” it noted. 

Limak mentioned in report

The report emphasized a share transfer agreement signed by the UK-based investment fund Actis to take over the shares of Limak Holding’s electricity distribution and retail subsidiaries Limak Uludag Elektrik Dagitim AS and Limak Uludag Perakende Elektrik Satis AS. 

“The UK-based infrastructure fund penetrated the market, where there hasn’t been significant dynamism in recent years, such as with electricity distribution and retail sales,” it added.

The number of transactions and their estimated total value in the infrastructure sector, which consists of electricity generation, distribution, retail, and natural gas distribution subsegments, surpassed transactions in the oil and natural gas markets in 2021.

The total estimated value of the 39 public M&As tripled the 2020 numbers, rising and to USD 1.5bn, according to Engin Alioglu, M&A Services Partner at PwC Turkey. Alioglu said the majority of these transactions, including privatizations, were carried out in renewable energy. “The remainder were carried out in thermal power generation, gas and electricity distribution, and retail and electric vehicles charging station infrastructure,” he added. 

YEKDEM plants sold

Alioglu also emphasized that the increasing interest in renewable energy power plants has concentrated on assets that benefit from USD payments from the first phase of the Renewable Energy Resources Support Mechanism (YEKDEM).  

“The positive impact of regulations from the Fourth Implementation Period (2021-2025) of YEKDEM on the financial and operational structures of license holding firms is one of the main reasons why foreign investors are interested in this market,” said Alioglu. 

Here are the factors that will shape M&A in the Turkish energy market this year, according to the PwC report:

>> Macroeconomic developments

>> Ongoing interest in the electricity distribution and retail market

>> Developments in YEKDEM and in Renewable Energy Resource Areas (YEKA)

>> Interest in alternative finance methods and the need for legal regulation

>> Interest by international finance institutions

>> Steps to be taken within the scope of the Paris Climate Agreement

>> Possible privatization of the Turkish Electricity Transmission Corporation (TEIAS)

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