Category: Business

Turkey and S&P fail to reach deal after spat over ‘junk bond’ rating

Standard & Poor’s said on Monday it would no longer offer a full rating service for Turkey, ditching much of its work with the economically booming country eight months after a spat over a negative report.

The credit ratings agency said it had failed to reach a deal with Turkey and would in future only issue an “unsolicited” assessment – meaning that it is not paid by the country to provide cover but does so anyway to meet investors’ needs.

The country responded angrily last May when S&P cut the outlook on its BB sovereign credit rating to stable from positive. Prime Minister Tayyip Erdogan warned Ankara may no longer “recognize” the agency, calling its decision “ideological.”

“We are converting our issuer credit ratings on Turkey to “unsolicited” as we no longer have a rating agreement with this sovereign,” S&P said in a statement.

“We will nonetheless continue to rate Turkey on an unsolicited basis because we believe that we have access to sufficient public information of reliable quality to support our analysis … and because we believe there is significant market interest in this unsolicited rating.”

S&P rates Turkey at BB, two rungs below investment grade. Fitch has raised it to investment grade at BBB– and Moody’s just below investment grade at Ba1.

“The government is … probably sending a non-too-disguised message that it sets little store in the S&P rating at BB,” said Timothy Ash, head of emerging markets research at Standard Bank.

“It has long argued that the current junk bond rating is unjustified and unfair, and we would agree,” he said.

S&P says that less than 10 per cent of its sovereign ratings are “unsolicited,” but these include the United States and Britain.

It was the reasoning behind S&P’s move last May that appeared to touch a raw nerve.

The agency cited Turkey’s huge current-account deficit – its negative balance of trade in good and services, earnings on foreign investments and cash transfers such as workers’ remittances – as well as the heavy inflows of foreign capital which the country needs to pay for that gap.

While the inflows continue, Turkey can live comfortably with its deficit. But if they dry up, the country could be in for “external shocks” such as a plunge of its currency which would push up inflation and interest rates, S&P warned at the time.

Turkey was Europe’s fastest growing economy in 2011 but its external deficit widened to almost 10 per cent of national output at the same time and the deficit remains the country’s main economic weakness even as growth slowed last year.

The deficit widened to $4.48-billion (U.S.) in November, the latest month for which data is available, from $1.96-billion a month earlier, although it came in just below a Reuters poll forecast for a deficit of $4.8-billion.

Turkish growth remains robust compared with debt-choked Europe and much of the Middle East, and state finances are strong. The government is aiming for a budget deficit of just 2.2 per cent of national output this year and state debt is seen at around 35 per cent of GDP, well below most euro zone states.

“Most people will just ignore this,” Alex Perjassy, senior emerging markets fixed income strategist at AllianceBernstein, said of the end of the ratings deal with S&P.

“Most people have ignored sovereign ratings on Turkey in the past few years given the ratings have not reflected Turkish fundamentals for some time.”

via Turkey and S&P fail to reach deal after spat over ‘junk bond’ rating – The Globe and Mail.

January 15, 2013
Turkey Turning to Coal to Reduce Gazprom Dependence

LONDON — Worried about dependence on pricier gas from Iran and Russia, Turkey is turning to its own coal.

The country signed a deal with a United Arab Emirates company that will boost its coal-fired power capacity 67 percent.

Turkey’s biggest gas supplier is Gazprom, which accounts for about half of imports, but it is long-term supply from Iran that could pose the biggest concerns.

Turkey might not be able to continue to ignore further tightening of international sanctions aimed at curtailing the Iran’s nuclear program.

Ankara signed a $12 billion deal with TAQA to mine lignite coal and by 2020 build new power plants capable of generating up to 8,000 megawatts.

“The TAQA deal is first and foremost motivated by the need to refurbish and build new coal-fired power plants, but the move to develop coal stems from a general concern that Turkey is hugely dependent on others for its energy needs,” said Andrew Neff, a senior analyst for IHS Energy.

The European Association for Coal and Lignite, or Euracoal, said Turkey imports more than 70 percent of its primary energy needs. Most of the 30 million tons of hard coal it annually uses is supplied by Russia, Colombia, the United States and South Africa, according to Euracoal.

Natural gas imports, mainly from Russia, Iran, and Azerbaijan, meet about 45 percent of Turkey’s demand for heat and power, according to the IEA, a dependency that comes with frequent price disputes with suppliers.

In another sign that Turkey’s policymakers are keen to reduce dependence on gas imports, the government said in December that it would not take part in Russia’s South Stream gas pipeline project.

The pipeline was designed to pump more than 60 billion cubic meters, almost twice Turkey’s annual gas demand, via the Black Sea into southern Europe. High gas prices, which make gas-fired power generation less attractive than coal, as well as concerns over gas-import dependence, have been shared by several European countries.

Consuming countries complain that Gazprom charges too much for its gas and that its long-term supply contracts are too inflexible. The European Union opened an antitrust case against Gazprom last year, sparking a political feud with Moscow.

In Germany, cheap coal prices have led to strong growth in coal-fired power generation.

In Poland, which relies heavily on Russian gas supplies but is also a big user of the more-polluting lignite that Turkey mines, the government is eying potentially large domestic supplies of unconventional natural gas sources, such as shale gas.

Ukraine said last month that it had secured a $3.6 billion loan from China that will switch power plants from imported natural gas to gasified coal.

Despite Turkey’s long-term aim of becoming less reliant on imports, its demand for Russian gas in the short term will likely rise to meet booming demand, Neff said.

via Turkey Turning to Coal to Reduce Gazprom Dependence | Business | The Moscow Times.

January 14, 2013
Turkey’s big thirst for new power

Turkey’s big thirst for new power

Florian Neuhof

Turkey is in a rush to grow its energy sector. And recent news that the Abu Dhabi National Energy Company, known as Taqa, will invest heavily in Turkish coal-fired power plants shows how serious Ankara is taking this commitment.

The deal, announced at the start of the year, will see Taqa build and operate a power generation base totalling 7,000 megawatts, or about 10 per cent of Turkey’s electricity needs by the time the plants are completed.

Turkey’s energy minister, Taner Yildiz, is keen to emphasise that efforts will be taken to minimise the environmental impact of the country’s power sector.

The plants will be fed with lignite, a soft brown coal reviled by environmentalists for the emissions its use entails. Lignite is found in Turkey’s soil and offers some relief in the complicated task of securing hydrocarbons from abroad.

Turkey is dependent on imports for 91 per cent of its oil and 98 per cent of its natural gas and it relies heavily on Iran and Russia for its supplies. It is therefore keen to push the share of electricity produced from gas from about 50 per cent to less than 30 per cent in the next decade and to diversify its hydrocarbon sources.

Turkey has reluctantly complied with United States and European Union demands to reduce imports from Iran as part of a new round of sanctions, but its dependence on Iranian supply has meant it has refused to cut economic ties with the country.

Nevertheless, Turkey has announced it will import more Saudi Arabian and Libyan crude to counter the effect of the sanctions on Iran and the trend for Arabian Gulf oil to depart to Asia.

Turkey’s confrontational stance with Syria, Tehran’s long-time ally, could also endanger imports from Iran.

Iraq’s immense oil and gas reserves are another source of hydrocarbons, and a pipeline already flushes 400,000 barrels per day (bpd) of Iraqi crude across the border to the Turkish harbour of Ceyhan. But, rather than focusing on good relations with Baghdad, Ankara seems intent on carving out its own oil and gas base in Iraq by encouraging the autonomous Kurdish north in its efforts to create an independent energy sector.

The Kurdish Regional Government (KRG) and Turkey are close to signing a deal under which the Turks will build production and pipeline capacity in Kurdistan, enabling the Kurds to export their hydrocarbons outside the Iraqi infrastructure.

The KRG’s efforts to take control of its resources is a huge source of irritation to Iraq’s central government. While closer ties with Erbil can serve to secure a great deal of oil and gas supply, the uncertainty of the geopolitics can also undermine future security of supply.

Turkey pays attention to its gas supply in particular. With electricity use projected to rise dramatically in the coming decades, adding further gas imports is crucial in spite of efforts to reduce its share in power generation.

But Turkey also has ambitions to establish itself as a gas-trading hub between the Middle East, gas rich Azerbaijan and Europe. Turkey and Azerbaijan have agreed on the Trans-Anatolian Natural Gas Pipeline project that will connect the latter’s Shah Deniz II gasfield development with the Bosphorus.

Turkish demand for gas stood at about 125,000 cubic metres a day at the end of last year. Before it can think of gaining in status as a transit hub it needs to ensure its own demands are met, experts say.

“It still needs to facilitate additional gas purchases and encourage new developments such as Shah Deniz Phase II and Kurdistan volumes to meet its own requirements,” says Stephen O’Rourke, a gas supply analyst at Wood Mackenzie.

Although piped gas plays the biggest part in Turkey’s thinking, Ankara has remained open to all options. This month, Mr Yildiz announced that he was in discussions with Qatar over an import terminal for liquefied natural gas (LNG).

Another future source of gas could be the Levant Basin, where huge reserves are believed to lie under the deep seabed. But Turkey’s confrontational stance towards Greece and its icy relations with Israel disadvantages Ankara’s position in the Mediterranean, in spite of an exploration agreement with North Cyprus.

If the Levant Basin fulfils its potential and starts yielding large amounts of gas, it could threaten Turkey’s position as a transit hub, analysts predict, as the most direct route to Europe is via Greece. But gas produced there may not be destined to Europe, anyhow.

“We expect LNG to be the most likely export monetisation solution for these discoveries, and consequently Europe is not a guaranteed market for this gas,” says Mr O’Rourke.

Overall, Turkey remains in a strong position to secure the gas necessary for its economic growth and to make it a significant regional hub.

“Turkey should be able to maintain its long-term energy objectives. However, this will become more complicated, given its increasingly complicated relationships with Syria, Iran, Cyprus, and Israel,” says Daniel Wagner, the chief executive of the consultancy Control Risk Solutions.

via Turkey’s big thirst for new power – The National.

January 14, 2013
Turkey firm invests in Tanzania

A renowned Turkish manufacturing company dealing with electronic appliances, BEKO has opened its showroom in the country in collaboration with Modern Holdings (EA) Ltd, making Tanzania a base for expansion of its footprint in East Africa.

While inaugurating the launch at KIDA Plaza in Mikocheni B, Dar es Salaam at the weekend, Premier Mizengo Pinda stressed the need to promote and strengthen the good bilateral relations between Tanzania and Turkey.

“We are determined to develop our bilateral relations with Turkey in every field and we are happy to see world class Turkish producers in our country,” said the premier. According to Premier, Turkey’s exports to Tanzania in 2011 were $170.7 million compared to $89.3 million posted in 2010.

The top export categories were iron and steel ($63.1 million), petroleum products and related materials ($36.1 million). Mr Pinda said Tanzania’s exports to Turkey were $21.7 million in 2011, an increase of 52 per cent compared to $14.3 million in 2010. The top five export categories for 2011 were tobacco and tobacco products.

via DailyNews Online Edition – Turkey firm invests in Tanzania.

January 14, 2013
Skype founder looks at Turkey, Brazil

Niklas Zennstrom, co-founder of internet phone service Skype, believes the next hot tech business will just as likely spring from Istanbul or Sao Paolo as from Silicon Valley or the coolest districts of London.

Skype founder Niklas Zennstrom (2nd R) is seen with Turkey’s European Union Minister Egemen Bağış during a sector meeting in Istanbul. DHA photo

“Talent can pop up anywhere in the world, it’s not just one city block,” the Swedish entrepreneur and venture capitalist said at the headquarters of his Atomico fund, based on upmarket New Bond Street in central London. Zennstrom is looking for start-ups ready to shift up a gear into new markets and has the experience, gained from growing Skype into a service used by millions around the world, to help them.

Skype was sold to eBay Inc in 2005 for roughly $3 billion, before being bought back by a consortium including Zennstrom in 2009 and then two years later sold on to Microsoft Corp for $8.5 billion, leaving him a multi-millionaire.

“If you have a product that works it’s important to scale (up) the business as quickly as possible,” said Zennstrom, named by Time Magazine in 2006 as one of its 100 most influential people. “As entrepreneurs, usually you may not have that experience; how does Asia work? Europe? Latin America?”

Atomico, founded by Zennstrom in 2006, has invested in companies in northern Europe including Finland-based Rovio, developer of Angry Birds, and Hailo, a London-based startup that has developed an app that connects passengers with taxi drivers and has raised $20 million so far.

It also led a $105 million funding round for U.S. online retailer Fab in July.

The investment fund, whose London office reception is decked out with simple designer furniture and modern art pieces, has opened offices in Turkey and Brazil, emerging markets with growing middle classes eager to shop online and buy internet services.

Zennstrom wants to make these markets a large part of Atomico’s portfolio in future.

Atomico is not necessarily looking for the latest gizmo or internet trend, but savvy businesses with talented leaders who can take advantage of growth in nascent sectors such as e-commerce.

“It’s a much more of an entrepreneurial spirit [in Turkey and Brazil] compared to southern European where it’s a depressed mindset,” Zennstrom said.

via BUSINESS – Skype founder looks at Turkey, Brazil.

January 14, 2013
Turkey’s employment rise to be three times higher than Europe’s

Turkey’s employment rise to be three times higher than Europe’s: OECD

Turkey will also be the third after the U.S. and Mexico which will create highest employment opportunity among OECD countries.

World Bulletin / News Desk

According to predictions of OECD, 1.047 million more people will join labor force in Turkey in 2013 and 2014.

This figure will be 372,973 in Europe in the same period.

Turkey will also be the third after the U.S. and Mexico which will create highest employment opportunity among OECD countries.

Currently, 159.6 million people are working in European zone which is comprised of 15 countries.

via Turkey’s employment rise to be three times higher than Europe’s: OECD | Economy | World Bulletin.

January 14, 2013