Istanbul authorities are reviving a plan to privatize the city's gas network in what could be one of Turkey's largest initial public offerings ever.
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(Bloomberg) — Istanbul authorities are reviving a plan to privatize the city's gas network in what could be one of Turkey's largest initial public offerings ever.
The IPO of the Egdas Gas Network is moving forward, according to Neslihan Vural, head of financial services at the Istanbul Metropolitan Municipality. It has been estimated that the company's value could reach $10 billion once gas tariff increases are approved. She added that the government aims to gradually reduce its share to less than 20% from more than 90% currently.
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“I am in favor of privatization,” Vural said. “The municipality must eventually return to purely municipal business.”
Egdas has long been the crown jewel of Istanbul's privatization list, despite the failure of an IPO attempt in early 2010. Now that Turkey's opposition party has a majority in the Istanbul Assembly, local officials see an opportunity to move forward with plans to raise funds to build infrastructure and strengthen their grip on the city.
While city council directives allowing the IPO remain in place from the first attempt, there is legal work to be done and the company's charter must be amended before authorities can hire investment banks, Vural said. The company's revenues reached 35.8 billion liras ($1.1 billion) in 2022.
Other potential stock listings include parking operator Ispark, water bottling company Hamidiye, bread maker Halk Ekmek and others, according to Foral. She said ESPARK could come after EGDAS.
Istanbul has a wide range of projects that need financing. Foral said it includes building a second station to generate energy from waste, improving subway lines, and purchasing 10,000 taxis to boost the current fleet by 50%.
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Election flashpoint
Finance for Turkey's major cities was a flashpoint in last March's local elections. Ozgur Ozil, head of the opposition Republican People's Party, accused President Recep Tayyip Erdogan of withholding state funds as punishment for disloyalty from urban voters. The government denies this allegation.
Now, Treasury and Finance Minister Mehmet Simsek is seeking to restore confidence in the Turkish economy, by holding meetings with international investors to promote the country's return to more traditional policies. Vural said Simsek signed a $715 million Istanbul unsecured green bond sale in November, and is expected to agree to finance four metro projects including a new line worth $925 million.
Foral said the municipality plans to raise 1 billion euros ($1.1 billion) this year by tapping capital markets and international financial institutions such as the European Bank for Reconstruction and Development and commercial banks.
In addition to planning ESG bond sales, Istanbul aims to raise $225 million through an international debt offering. Under the agreement, a special purpose vehicle set up by Bank of America and London-based Bank Trust Investment Limited will provide a loan after selling the bonds in foreign markets, Vural said.
-With assistance from Robert Brand.
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