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Istanbul moves ahead with $10 billion gas network IPO plan

Istanbul moves ahead with $10 billion gas network IPO plan

 


By Ercan Ersoy

Authorities in Istanbul are relaunching a plan to privatize the city's gas network in what could be one of Turkey's biggest-ever IPOs.

The IPO of the Igdas gas network is underway, according to Neslihan Vural, head of financial services at Istanbul Metropolitan Municipality. She estimates the company could be valued at up to $10 billion once the gas rate increase is approved. The government aims to gradually reduce its participation to less than 20 percent, from more than 90 percent currently, she added.

I am in favor of privatization, Vural said. The municipality should eventually return to pure municipal works.

Igdas has long been the crown jewel of Istanbul's privatization list, although an IPO attempt in the early 2010s failed. Now that Turkey's opposition party has a majority in Istanbul's city council, local officials see an opportunity to advance plans to raise funds to build infrastructure and strengthen their hold on the city.

Although a city council directive allowing the IPO is still valid on the first attempt, there is legal work to be done and the company's charter must be adjusted before authorities can hire investment banks. investment, Vural said. The company achieved a turnover of 35.8 billion lira ($1.1 billion) in 2022.

Other potential listings include parking lot operator Ispark, water bottler Hamidiye, bread maker Halk Ekmek and others, according to Vural. Ispark could go after Igdas, she said.

Istanbul has many projects that require financing. They include building a second waste-to-energy power plant, improving metro lines and purchasing 10,000 taxis to increase the current fleet by 50%, Vural said.

Election flash point

Funding for Turkey's major cities was a flashpoint in March's local elections. Ozgur Ozel, leader of the Republican People's Party (CHP), accused President Recep Tayyip Erdogan of withholding state money as punishment for urban voters perceived as disloyal. The government denies this allegation.

Now Treasury and Finance Minister Mehmet Simsek is seeking to restore confidence in Turkey's economy, holding international meetings with investors to tout the country's return to more orthodox policies. Simsek signed the sale of unsecured green bonds to Istanbul for $715 million in November and is expected to approve financing for four metro projects, including a new $925 million line, Vural said.

The municipality plans to raise US$1 billion ($1.1 billion) this year by tapping capital markets and international financial institutions like the European Bank for Reconstruction and Development and commercial banks, Vural said.

In addition to planning ESG-compliant bond sales, Istanbul aims to raise $225 million through an international debt offering. Under the deal, a special purpose vehicle created by Bank of America Corp and London-based BancTrust Investment Bank Ltd. will make a loan after selling bonds in overseas markets, Vural said.

Published May 16, 2024, 9:25 a.m. EAST

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