Category: Business

Turkey Excess Power Seen Delaying Projects as Zorlu Prefers Coal

Excess electricity capacity threatens investment in Turkey’s power industry and is leading Zorlu Enerji (ZOREN) Elektrik Uretim AS to favor an investment in a more economical coal-fired plant, its chief executive said.

Central bank policies aimed at slowing inflation and reducing the current-account deficit have sapped electricity demand and created a surplus as new plants are added to the national grid, Sinan Ak, Zorlu’s chief executive, said in an interview at an energy conference in Istanbul yesterday. The Istanbul-based company has interests in Turkey, Russia, Pakistan and Israel.

Turkey’s electricity surplus was about 4,500 megawatts last year, or 7.8 percent of total capacity, Energy Minister Taner Yildiz said at the same conference yesterday. That figure may double to as much as 10,000 megawatts this year, Ak said.

“This is causing players in the energy industry to be cautious about making new investment decisions, especially on natural gas-fired power plants,” Ak said. Zorlu has postponed its plans to build a gas-fired plant in the country and will focus on a coal-fired plant instead, he said.

The company will finalize an investment decision this year for a power plant to burn domestic lignite, or coal, with a maximum capacity of 1,000 megawatts, Ak said. That investment may cost more than $1 billion, he said, and Zorlu is in talks with Japanese and South Korean suppliers of generators and other equipment that can burn local lignite, he said.

More Economical

A coal power plant is more economical in an environment of excess capacity because unlike wind, solar or hydro plants, the coal plant produces energy only on demand, Ak said. It’s also less expensive to operate than a gas-fired plant, he said.

Turkish electricity demand fell 2.4 percent to 60.5 billion kilowatt-hours in the first quarter over the previous quarter, according to data from the state power transmission company Teias’s website. The country had 57,800 megawatts of power capacity at the end of March, the data shows.

Turkey’s gross domestic product probably expanded 2.4 percent in the first quarter, according to the median estimate of 27 economists surveyed by Bloomberg from April 19 to April 24. The economists reduced their forecast from 4.3 percent in the previous survey.

“We expect the central bank’s expansionary monetary policy starting from April to speed up economic activity in coming quarters,” Turker Hamzaoglu, an economist at Bank of America Merrill Lynch in London, said by e-mail today. He said the expansion in the first quarter was probably 3 percent. Warmer weather in the first quarter probably also helped to reduce power use, he said.

Israel Plans

Zorlu is the third-biggest of five electricity producers listed on the Istanbul Stock Exchange, with revenue of $291 million last year. Aksa Enerji, which is part-owned by Goldman Sachs Group Inc., is the biggest with revenue of $1 billion. Zorlu shares have gained 39 percent this year.

Zorlu has 770 megawatts of power capacity in Turkey, Russia and Pakistan and gas-fired power plant investments in Israel. It plans to increase capacity to 1,300 megawatts in two years by investing $1 billion, Ak said. The additions to capacity will include 250 megawatts in geothermal energy, 110 megawatts in wind and 150 megawatts in hydropower, he said.

“We plan to have a serious capacity increase in Israel in solar, wind and gas-fired plants,” he said. The company has a 42 percent stake in three power projects in Israel, one with 800 megawatts capacity that will start operations this year and two others with a total of 175 megawatts of capacity that will be active from 2014, he said.

Zorlu plans another 50-megawatt wind power plant in Pakistan after the first one starts operations in May, Ak said.

via Turkey Excess Power Seen Delaying Projects as Zorlu Prefers Coal – Businessweek.

April 26, 2013
Turkey Submits Bill Offering Amnesty for Repatriation of Assets

Turkey’s government submitted a draft bill to parliament offering an amnesty for repatriation of assets held by Turks abroad.

The bill proposes a reduced tax rate of 2 percent, with no questions to be asked about how the money was earned and no penalties to be applied, according to the draft submitted to the parliament yesterday.

Turkish citizens and companies have $130 billion of portfolio investments abroad, including more than $50 billion in U.S. Treasuries, Milliyet newspaper reported on April 17, citing Deputy Prime Minister Ali Babacan. The Turkish private sector invested a record $4.5 billion abroad in 2012, Babacan said, according to Milliyet.

Turkish businessmen and companies can declare money, gold, securities and other capital markets instruments held abroad to tax offices by July 31 and pay a 2 percent tax on them within three months of the declaration, the draft says. The holdings can then be repatriated in installments.

Profits earned by overseas units of Turkish companies and proceeds from sales of unit stakes outside Turkey before Oct. 31 will also be exempt from corporate and income tax should the funds be repatriated by the end of the year for investment purposes, the draft says. The Cabinet may extend repatriation periods and a higher rate would be charged should the owners of the assets fail to pay the 2 percent tax after declaring them.

Babacan said the move could be more effective than a previous amnesty announced in late 2008 and in force until the end of 2009, when there was a global economic crisis, according to Milliyet.

Turkish citizens and companies declared 48 billion liras under that law, which covered assets both abroad and in Turkey. A total of 27 billion liras was repatriated while 5 billion liras in domestically held assets also returned to the financial system, Osman Arioglu, former head of the tax authority, said today. The new legislation is restricted to assets held abroad.

via Turkey Submits Bill Offering Amnesty for Repatriation of Assets – Businessweek.

April 26, 2013
New Istanbul Airport Will Kill 658,000 Old Trees

Laurie Balbo

Turkey’s booming aviation industry is planning new development that will wipe out over half a million old-growth trees.

Istanbul aims to build its third airport on nearly a square kilometer of previously pristine forest in the northern, European part of the city, on Lake Terkos near the Black Sea. With six runways and an annual capacity of 150 million passengers, Transport Minister Binali Yildirim told Turkish newspaper Zaman “it will be the largest airport in the world.”

Capable of surpassing passenger throughput at London’s Heathrow and the trio of airports in the United Arab Emirates, this new facility will be so large it’ll be visible from space.

An environmental impact report (ÇED) prepared by the Ministry of Environment assessed probable environmental effects from project construction. It predicts that, if the airport is built as planned, more than half a million trees spanning ten species will be chopped.

The project site is 80 percent forested, dense growth that acts as a natural carbon sink for populous Istanbul. Airport development, with associated deforestation, will interrupt carbon’s natural cycling and considerably increase regional air pollution.

Carbon cycling is the natural transfer of carbon between the biosphere and earth’s atmosphere, Trees and plants are the primary transfer agents.

Forests pull CO2 out of the atmosphere as part of photosynthesis. A series of biochemical reactions convert the CO2 into glucose, which fuels plant cell function, growing biomass. Carbon in plantlife is conventionally released back to the atmosphere through respiration, burning, and biomass decay.

Large-scale deforestation eliminates natural carbon storage, releases unnatural amounts of CO2 into the atmosphere, and reduces forward capacity to suck CO2 from the air. All serve to accelerate anthropogenic climate change.

The ÇED, recently released on the ministry’s website, states that airport construction will cause irreversible damage to the area’s forest and water ecosystems. “The area where the third airport is planned to be built is 7,650 hectares, and 6,172 hectares of this field consists of forested area, 1,180 hectares are used for mining, 660 hectares constitute a lake, 236 hectares are used for pasture and 60 hectares are used for agricultural activities. There are 2,513,341 trees in the area…maritime pine, stone pine, Calabrian pine, black pine, oak, hornbeam, narrow-leafed ash, linden, Norway maple and cedar.”

The report states that there are 70 animal species living in the forest, and warns that the proposed development will destroy the area’s vegetation and natural features. Increased vehicle traffic and urbanization following airport construction will exacerbate air pollution and habitat loss.

Istanbul has two international airports: Ataturk on the European side (37 million annual passengers) and Sabiha Gokcen on the Asiatic (13 million annual passengers). The third airport is expected to create 100,000 new jobs in this city of 15 million people.

Image of felled trees from Shutterstock

April 26, 2013
Istanbul’s inbound tourism riding high

Theodore Koumelis – 25 April 2013, 10:38

The city saw a 16 per cent increase in inbound arrivals last year over 2011, fuelling the call for more capital investment in infrastructure, facilities, airline and rail networks as well as a range of accommodation options. Room demand rose 8.9 per cent in 2012 while supply increased at just 4.6 per cent, according to STR Global.

ISTANBUL – Hospitality industry experts scheduled to speak at The Turkey & Neighbours Hotel Investment Conference (CATHIC) next month, characterise Istanbul, the host city, as a rapidly growing destination where the hotel development pipeline rivals London.

Istanbul has emerged as the world’s fifth top destination, welcoming more than nine million of the roughly 25 million foreign tourists who visited the country last year.

The city saw a 16 per cent increase in inbound arrivals last year over 2011, fuelling the call for more capital investment in infrastructure, facilities, airline and rail networks as well as a range of accommodation options. Room demand rose 8.9 per cent in 2012 while supply increased at just 4.6 per cent, according to STR Global.

Elizabeth Randall Winkle, STR Global managing director, said there are more than 5,000 hotel rooms in the development pipeline. She is one of several industry experts scheduled to discuss hotel development in Turkey during CATHIC, which will be held May 29-30 at The Marmara Taksim in Istanbul.

“If we look at the number of pipeline rooms as a percentage of existing inventory, we can see that at 15 per cent Istanbul looks to be the front-runner, with London coming in a close second with 14 per cent,” she said. “However, London’s current room supply already stands at three times that of Istanbul for double the number of foreign visitors.”

Another expected CATHIC speaker, Defne Gezen, vice president of Jones Lang LaSalle, said Istanbul is on its way to becoming an important international financial centre, paving the way for a surge in business traffic, as well as a tourism capital and a destination for events.

Defne Gezen, vice president of Jones Lang LaSalle.

A third airport is planned for Istanbul, which is expected to further expand arrivals and, with it, more investment.

Ongoing initiatives including Istanbul’s bid to host the 2020 Olympic and Paralympic Games also has strengthened the city’s appeal as a new global destination. The city already is a favourite location for TV series, documentaries, commercials and movies.

Istanbul will be the subject of a panel discussion at this year’s CATHIC to discuss room supply and performance and whether current momentum is sustainable and returns are sufficient to support new supply, among other issues.

The Focus on Istanbul session will feature Elif Balci Fisunoglu, general manager of the Istanbul Convention & Visitors Bureau; Murat Yilmaz, senior director, acquisitions & development, central & Eastern Europe, for Starwood Hotels and Resorts Worldwide; and Serra Arikok, coordinator of Tourism Investments for the Demsa Group.

CATHIC speakers also will include Marty Kandrac, Blackstone managing director; Eric Danziger,Wyndham Hotel Group president & chief executive officer; Geoffrey Breeze, World Travel & Tourism Council executive director; Wolfgang Neumann, The Rezidor Hotel Group president & chief executive officer; and Mehmet Onkal, BDO managing partner.

CATHIC is co-organised by Bench Events and Questex Media, which also manages the Russia and CIS Hotel Investment Conference, Arabian Hotel Investment Conference, International Hotel Investment Forum Asia Pacific and International Hotel Investment Forum Berlin.

April 26, 2013
ICANN announces opening of Istanbul office as part of globalization effort

ICANN announces opening of Istanbul office as part of globalization effort

By Mikael Ricknäs, IDG News Service

As part of ICANN’s efforts to become a more global organization it detailed plans on Thursday for its new office in Istanbul.

The Internet Corporation for Assigned Names and Numbers coordinates the DNS (Domain Name System) and IP addresses, which are the cornerstones of the Internet.

The announcement marks a significant step for ICANN as it prepares to spread its operational functions across three global headquarters—Los Angeles (which is the current location), Istanbul and Singapore—a setup that will fundamentally change the way the organization operates, according to CEO Fadi Chehadé, who will spend parts of the year in all three cities.

“It will result in a complete change in ICANN’s posture and understanding for what our stakeholders around the world need, because we are not just about opening new offices. I am taking the functions within ICANN and slicing them in three, so every function we have will literally be running across the world in all time zones,” Chehadé said.

To make this possible, ICANN is also putting in place standardized platforms and mechanisms to track processes, so that they can be followed around the world, according to Chehadé.

The choice of Istanbul may surprise some people, but Chehadé is convinced it’s a good place to be. The city has a growing infrastructure and a good airport. It is located close to Europe, the Middle East and Africa and has a young population with technical and linguistics skills.

The Istanbul office will be led by David Olive, ICANN’s current vice president for policy development. A number of current ICANN staff will relocate to Istanbul over the coming months and local staff also will be hired.

“I would like our first people to start at the Istanbul hub as early as June, and if possible June 1,” Chehadé said.

At the same time, the lease for the Singapore office is being finalized. The necessary legal entity was formed in the last few days, according to Chehadé

ICANN not locating one of its global headquarters in the E.U. may be seen as a snub. But the feedback Chehadé has received from E.U. members has been very supportive, he said.

“There is a clear appreciation, I think, for Turkey being the right hub between the Middle East, Europe and Africa,” Chehadé said.

Turkey applied to join what was then the European Economic Community at the end of the 1980s, and in 1997 it was declared eligible to join the E.U. Accession negotiations started in 2005, according to the E.U.’s website, but they are still far from finalized, highlighting the troubled relationship between the two.

This is a busy time for Chehadé and his colleagues at ICANN as they work on both the globalization effort and the introduction of new gTLDs, which will add more suffixes to the end of domain names.

“By mid-year this year we should start being in a position to recommend the delegation of new gTLDs. Some people ask what mid-year means, and I am giving us some room given that there are many, many moving parts, but sometime in the July to August time frame we should hopefully be ready,” Chehadé said.

April 26, 2013
Two Countries, Turkey and Venezuela, Are Candidates for a Crisis

With the bloom coming off the emerging markets rose, one economic model has drawn a circle around two countries that stand the greatest risk of falling into a crisis.
Chlaus Lotscher | Photolibrary | Getty Images
David Rees, emerging markets economist at Capital Economics, said the firm has developed five criteria to identify whether a country’s economy has overheated to the point where it is threatening to develop into a full-scale problem.

The good news is that the Capital model finds no country in “immediate threat of crisis.”

But the bad news is that at least two countries are tilting in that direction and could pose danger to investors.

Rees identifies the endangered duo as Turkey and Venezuela.

(Read More: Tesco Quits US as Profits Fall for First Time in 20 years)

Turkey’s stock market has surged 7.3 percent in 2013 and is up 42 percent over the past 12 months. The country outperformed virtually all other emerging markets in 2012 as it modernizes its economy and pushes pro-growth programs.

Venezuela’s markets tell an even more robust story, with the Caracas exchange booming 37 percent this year and more than 200 percent over the past 12 months. While some feared the rally might falter due to political upheaval after President Hugo Chavez’s death, the market has gone on its merry way.

Despite the powerful gains, Rees advises investors to watch five factors: Growing current account deficits; rapid credit expansion; surging short-term external debt; bubbling stock market prices (50 percent is considered a red flag); and large growth in real exchange rates.

Broadly speaking, capital inflows “are something of a double-edged sword” for developing economies, Rees said. They both can help spur development but also “can fuel overheated economic growth and asset price bubbles,” he added.

“In extreme cases, capital flight can then lead to recession and sharp falls in asset prices that can culminate in defaults on debt repayments,” Rees said in an analysis.

The warning comes as emerging markets take a break after a decade of strong growth.

Overall, emerging market stocks are down for the year, with the iShares MSCI Emerging Markets exchange-traded fund off more than 7 percent. Investors have pulled more than $2 billion from the ETF, the third-most of any of its peers, according to IndexUniverse.

Still, some strategists remain positive on the group, reasoning that the underlying indicators remain strong even if sentiment has shifted due to negative headlines in the high-profile BRIC nations – Brazil, Russia, India and China.

(Read More: By 2015, Producing in China Will Be as Costly as US)

“In general, we see good long-term value in emerging markets based on favorable economic fundamentals,” Wells Fargo said in a recent analysis. “Valuations for emerging markets overall and for the larger markets are some of the cheapest in the world.”

Investors should keep watch, then, on where the real opportunities — and crises — present themselves.

“There is a risk that a prolonged period of loose monetary policy in the developed world could push large flows of capital into EMs over the coming years,” Rees said. “Accordingly, it would be useful to know if, and when, a crisis is about to unfold.”

April 25, 2013