The AES Corporation announced that it has entered into an agreement with KOC Holding to form a joint venture in Turkey, AES-Entek, that will develop and operate power generation projects. AES and Koç Holding will have equal interests in Entek Elektik Uretim A.S. (Entek), which includes 300 MW of natural gas facilities. AES-Entek will diversify into other energy sources - coal, hydroelectric, wind, as well as natural gas - by pursuing greenfield projects, acquisitions, and other opportunities through the Government of Turkey's plan to privatize 15 GW of generation assets. The companies will benefit from Turkey's position as an energy corridor for Europe, the Middle East and Russia by collaborating on projects throughout the region.
AES-Entek combines AES' global development and operations experience with Koç Holding's market strength and local energy sector insight. As Turkey's largest conglomerate, Koç Holding includes industrial sites, as well as mining and refinery businesses. Closing on the share purchase agreement is subject to approval by Turkish regulatory authorities and is expected to occur before the second quarter of 2011.
At a signing ceremony today in Istanbul, leaders of each company remarked on the significance of the joint venture and the potential for Turkey's power sector.
Mustafa V. Koç, Chairman of Koç Holding, said, "Today Koç Holding formed an important partnership in the field of energy with AES, one of the world's leading power companies. As we have in the past, we are forming a foreign partnership to bring expertise and capital to an extremely important sector for Turkey. This partnership demonstrates a collective trust in the Turkish economy and its people, and both companies are well capitalized to take advantage of growth opportunities."
Paul Hanrahan, President and Chief Executive Officer of AES, stated, "We value Koç Holding's extensive knowledge of the Turkish market and see enormous opportunity to develop and modernize electricity generation projects that will deliver a compelling return on investment. In so doing, we see the potential to strengthen Turkey's role as a regional leader in the power sector, building upon its geographically strategic position."
Erol Memioglu, President, Koç Energy Group, stated, "Koç Holding has been operating in all branches of Turkish energy: oil refining and distribution; gas distribution; electricity production; as well as coal mining. We are optimistic about building on our successes in the energy sector through our partnership with AES, and believe we can diversify risk and apply our resources more effectively if we combine our experience with our partner's international power expertise. With a shared vision and a complementary corporate culture, we believe AES-Entek is well positioned to meet our goal to become one of the five largest Independent Power Producers in Turkey by 2015."
AES entered Turkey as an investor in the power sector in 2007, consistent with the Company's strategy to pursue opportunities in markets with increasing demand for electricity. Turkey is one of the world's fastest growing economies with its annual Gross Domestic Product projected to more than five percent, according to Eurostat. Turkey's operating capacity of 46 GW of coal, geothermal, hydroelectric, natural gas and wind facilities is expected to increase 30 percent by 2015.
The Turkish electricity market uses three systems to determine prices: balancing mechanism; bilateral contracts; and regulated tariffs. Entek's facilities sell power to the spot market and through bilateral contracts, and can benefit from peak period operations. AES-Entek will be one of the ten largest Independent Power Producers in Turkey with assets including a 142 MW combined cycle natural gas facility in the Bursa Demirtas Industrialized Zone, and a 157 MW combined cycle natural gas facility in Kocaeli.
AES' subsidiary, AES Mont Blanc Holdings B.V., (a Netherlands company) will acquire a 49.6 percent interest from Aygaz, which is controlled by Koç Group. Upon closing the shareholders of AES-Entek Elektrik Üretim A.S. (AES-Entek) will consist of the AES (49.62 percent), the Koç Group (49.62 percent), and certain minority shareholders (0.76 percent).
