The privatisation of Turkish electricity distribution companies Uludag Elektrik Dagi­tim (UEDAS) and Camlibel Elektrik Dagitim (CEDAS) spawned the largest financing and longest debt tenor to date for a sale in the sector – and all within six months of being awarded and placed with­in the domestic Turkish bank market.

The electricity privatisation process start­ed in 2008, in the worst possible global lending climate. Around 15 tenders have been launched with only seven grids suc­cessfully transferred to the private sector.

The UEDAS/CEDAS deal started life as two separate transactions. After the path­finder BEDAS (Bashkent Electricity Distri­bution) and SEDAS (Sakarya Electricity Distribution) deals, four more distribution companies – the UEDAS network, the CEDAS grid near Sivas, the Firat grid in the Eastern province of Malatya and the grid around the Eastern City of Van – were put up for tender by Turkey’s Privatisation Administration in February 2010.

From 42 pre-qualified bidders, three Turkish companies emerged as winners: Limak bought the Uludag Grid for $940 million; Kolin bought the Camlibel grid for $285 million; and Aksa Elektrik Pera­kende Satis paid $330 million for Firat and Van.

After the sale, Limak, Kolin and Cengiz formed a partnership and split the com­bin­ed $1.198 billion of assets into one-third share­holdings. All three sponsors are ener­gy producers and having a combined dis­tri­bution network results in vertical in­tegration – in effect the sponsors have guaranteed demand for their electricity production.

In terms of losses from the grid – one of the major problems with Turkey’s transmission system – the assets are some of the stronger of the 21 TEDAS (the state-owned joint-stock company engaged in the distribution and retail sale of electri­city) distribution com­panies that are under privatisation.

UEDAS covers four cities – Bursa, Balıkesir, Canakkale and Yalova. The re­gion has an electricity consumption of 11,050 Gwh, around an 8.2% market share in Turkey. There are 2.3 million users in the region (market share %7.3) and the population of the region is 4.4 million. The electricity loss and theft ratio in Uludag region is 5.6%, much lower than the Turkey’s average of 15.6%.

CEDAS covers three cities – Yozgat, Sivas and Tokat. The region has an elec­tricity consumption of 2,139 GWh (mar­ket share 1.6%). There are 700,000 users in the region (market share 2.3%) and the population of the region is 1.8 million. The loss and theft ratio in Camlibel region is 8.8%.

The debt financing behind the deal com­prises a $1.087 billion letter of guarantee facility and a $973 million term facility. Turkey’s banks have maintained strong liquidity since the 2008 start of the global financial crisis and had little trouble fill­ing the gap left by international lenders, which have only recently reappeared in the Tur­kish market on the Enerjisa 2 financing.

Five Turkish banks – Garanti Bank, Isbank, TSKB, Halkbank, Vakiflar Bank – arranged the financing package on a club basis in less than two months. The payment terms offered by the Privatisation Administration included two options: a cash payment option and a term pay­ment option. The term payment option requires one down payment amounting to 20% of the total payment on the transfer date followed by four equal term pay­ments in four years.

The sponsors took advantage of the favorable interest rate charged by the Privatisation Administration on the term pay­ments option. They made the down payment through the $973 million term loan and equity, and submitted $1.087 billion of bank letters of guarantee (LGs) to secure the term payments. The LGs will be refinanced by the available commitments under the cash loan and equity by the time of each term payment in the next four years.

The MLAs also provided $185 million of LGs to be given to TEDAS to secure the electricity purchases of the two distribution companies. 

Uedas and Cedas privatisation
Status: Financial close 26 August 2010
Description: Financing of the acquisition from the state of 100% of the shares of the Uludag Elektrik Dagitim (UEDAS) and Camlibel Elektrik Dagitim (CEDAS) electricity distribution companies in Turkey
Sponsors: Limak, Kolin, Cengiz
Concession awarder: Privatisation Administration
Lead arrangers: Garanti Bank, Isbank, TSKB, Halkbank, Vakiflar Bank