Why is the govt favoring the same companies?

The government is making tailor-made legal adjustments, only to save certain companies. The latest example of this is the law enacted at the beginning of August

Not only has the construction sector collapsed in Turkey, but the energy sector is also following. Not unlike the motorway, bridge and airport building industry, the energy sector has elvoved into an extreme profit-yielding field.

And again, the government is conducting tailor-made legal adjustments. But only to save specific companies. The latest example of this came this August when a new law was enacted.

Let us start with a straightforward question: is the aim of the Justice and Development Party (AKP) to protect and save the same companies all the time?

Let's try to answer this question through a news story that was published last week, a law that was adopted last month and a crisis that erupted last year.

The news story published on Daily Dünya on August 29, 2019, was headlined "Power plant relocated for energy equilibrium." It had to do with certain natural gas power plants that were to be dismantled and moved to regions where consumption was higher, with the overarching aim of reducing the supply and demand gap between certain groups.

Given the underlying rule of the market is to reach a supply and demand equilibrium, such an idea would appear to be quite compelling. But is that truly the aim?

In parallel to the crisis, due to a industrial shrink, it is true that a demand surplus occured regarding electricity. Actors in the electricity market acknowledge this but associate it to bad planning. On the other hand, there are electricity shortages and frequent blackouts in several places. Moreover, prices are increasing rapidly. It is obvious that there is bad planning. Upon more thorough examination, the issue is not only the recession but also a significant crisis related to the energy sector.

The Energy Market Regulatory Board (EPDK) itself has admitted this: "energy excess has occurred at certain regions." The regions are the Black Sea coast and Northeastern Anatolia. Why is there such an excess in those regions?

The reason is that, despite the persistent warnings of experts in the field that there was no need for them, hydroelectric power plants (HES) have been built on every creek, river and stream. In the Black Sea region where the HES plants have destroyed swathes of natural land, the production to consumption ratio is 211 percent.

Similarly, in East Anatolia, the second region where most HES plants were built, this rate is around 130 percent. As of today, the number of registered HES plants is 641 and continues to rise.

In other words, the problem is not only an excess of supply, but the inflation of HES plants.

In Turkey, there are nearly 300 firms actively operating in the energy field. Some of them were present before the ruling Justice and Development Party (AKP) era. Most of them were incorporated within large holdings. There are also several foreign investors. The remainder, around 60 or 70 percent, entered the energy field during the AKP reign. Their former field was construction.

Another group is that of local companies that were formed especially for HES contracts. There are hotel owners and even tourism companies amongst them. A quick glance at the companies that have built the highest number of HES plants gives us Limak, Cengiz, Kolin, Kalyon and İC İçtaş - all of which have frequently come across in highway, bridge and airport tenders.

Thus, the HES business has turned into a high profit activity during the AKP era. Several laws and regulations are prepared to facilitate the sharing of profit among AKP-related companies.

While the crisis triggered by the foreign exchange shock precipitated the collapse of the construction sector, there are strong signs that the energy sector will follow. It is reported that the unpaid debts of companies that have entered energy bids have reached $60 billion.

Attempting to address the concerns of ordinary citizens as well as the debts of constructors, cement producers, sugar factory owners that are unable to pay their HES loans, Finance Minister Berat Albayrak came up with the "energy fund" initiative, urging banks to restructure the loans. Yet these initiatives cannot be sufficient for each one of them. Relocating plants, as well as extending their consumption guarantees, is not a solution for those companies mired in debt.

So what has the government done to resolve this? The clue is in the omnibus bill that was passed in August.

The income tax law and other amendments that were adopted in the beginnşng of August included an Article which extended the period of privatizations related to energy tenders up to 36 months. This article is in favor of renewable energy companies and the Çayırhan tender, located not far from Ankara.

The Kolin-Kalyon-Çeliker partnership that won the Çayırhan tender as well as the Kalyon and South Korean Hanwha Group partnership, and the Siemens-Türkerler-Kalyon partnership have all gained three-year extensions.

This implies that changes to tender specifications - two years after the bid was made - were allowed. Another grave consequence is that this has been tailor made. It is no coincidence that the companies that have come up were Kolin and Kalyon, as they are known to be close to the AKP.

So let's answer our initial question with a straightforward reply. The AKP's job is to protect and save certain companies. And who actually owns these companies?

Whilst reviewing your electricity bills, perhaps ponder upon that.

*This abridged article first appeared on GazeteDuvar on Tuesday, September 3, 2019.

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