German utility EWE is considering exiting the once-promising Turkish market after it suffered from a tumbling Turkish lira and historic connections to a failed putsch attempt. Oldenburg-based EWE has hired Barclays to consider the Turkish unit’s future with at least two rivals mulling a bid.
The review is part of a broad strategy review by CEO Stefan Dohler, who took the helm January 1. A spokesman played down the rumors of a Turkish sale: “An appropriate review process led by the new CEO will be complete in the summer of 2018. The Turkish market is being reviewed within this context.”
The Turkish market once held great promise for EWE with Turkish head Frank Quante quipping as recently as 2015 that the division won a new customer every eight minutes. Last year EWE’s foreign activities, which include Poland but predominantly reflect the Turkish business, saw sales fall 14 percent to €624 million. Operating profit slipped 3 percent to €24.8 million.
But it buys its gas in dollars and then sells it on in lira, exposing the company to significant currency risks — the lira has slipped 56.4 percent over the past five years. Company insiders said a rumored €150 million in risk provisions was more than the company actually set aside. However, it did invest €120 million in the country’s gas network at the behest of Turkish Energy Minister Berat Albayrak, who is also the son-in-law of President Recep Tayyip Erdogan.
The Turkish government criticized the company for its connections to the Gülen movement, which it blames for the 2016 coup attempt. Ten EWE staff were fired, including senior executives, after being accused of ties to what Ankara describes as “terrorist movement.”
With growth rates over 5 percent, Turkey is among the world’s fastest growing energy markets, an attractive proposition in the light of Europe’s stagnant energy consumption. In 2012, E.ON — Germany’s second-largest power provider — selected Turkey as one of its main target markets. Since then, it has invested over €2.8 billion in the country. Steag and EnBW, two smaller German utilities, also have a presence.
E.ON recently moved to scotch rumors that it might withdraw from the market. When its Turkish joint venture Enerjisa Enerji, which has 9 million customers, was floated on the stock exchange recently, E.ON quietly reduced its stake from 50 to 40 percent. But the company also made a public show of support for the country, praising its “growing energy consumption and positive regulatory environment.”
EWE has also made a statement: “In the past ten years, EWE has built up economically healthy companies in Turkey which can now make independent investments.” Not quite a guarantee that they won’t pull out.
Jürgen Flauger covers the energy market for Handelsblatt, including electricity and gas providers, international market developments and energy policy. Ozan Demircan is a correspondent in Switzerland. To contact the authors: email@example.com, firstname.lastname@example.org