Recent Development

Sell-side advisors Citigroup and Burgan Investment, together with the Privatization Administration, are finalizing preparations for the Istanbul gas distribution company IGDAS' tender announcement. According to Istanbul Mayor Kadir Topbas' latest press statements, the tender will be announced in November. The draft Natural Gas Market Law, which outlines the requirements of the tender, is still under review by a parliamentary commission.[1]Enactment of the draft law and commencement of the privatization process is expected soon.

What the draft law would do

The draft law includes provisions and exemptions intended to increase bidders' appetite for the IGDAS privatization.

  • Usage and transportation fees fixed for 10 years

Under Article 11 of the draft law, usage and transportation fees will be fixed at the Turkish lira equivalent of USD 0.062378/m3 and USD 0.001480/m3, respectively, for 10 years following the signing of a share purchase agreement. Investors will, therefore, enjoy decade-long predictability and protection against currency fluctuations.

  • Exemptions from cumbersome obligations

Under the current Natural Gas Market Law, gas distribution companies are subject to burdensome requirements, including obligations to (i) offer the Municipality a 10% stake in the company, and (ii) have the Municipality appoint a director to the company's board. The draft law eliminates these provisions for the IGDAS tender — as was the case for the previous Baskentgaz tender. The IGDAS tender bid winner will, therefore, not be required to offer the Municipality shares or to allow it to appoint a director.

  • Municipality or the Privatization Authority

It is unclear at this point whether the Municipality or the Privatization Authority (as in Baskentgaz's case) will be the agency to conduct the tender. Under Article 11 of the draft law, the Istanbul Municipality has the discretion to transfer the right to conduct the tender to the Privatization Authority. This will be clarified once the announcement is made. Separating the Asian and European distribution activities is also an option under consideration.

A Peer Company: Baskentgaz Privatization

Last year, Baskentgaz, Ankara’s natural gas distributor, was tendered to Torunlar Gida Sanayi ve Ticaret A.S. for USD 1.16 billion. Similar to Mayor Topbas' statement about fees for the IGDAS privatization, a USD-based fixed fee policy for use and transportation fees was used to increase bidder interest.

With those difficult issues eliminated, the amount offered for Baskentgaz increased from USD 585 million to USD 1.16 billion once the new rules were adopted for a fourth successful tender.

Additionally, the Turkish Court of Accounts' confirming ruling on Baskentgaz is a significant benchmark for the IGDAS privatization. Although it was alleged that Baskentgaz was privatized for less than its fair market value, unlike the Motorways and Bridges tender, the tender was not cancelled.


IGDAS is the largest natural gas distribution company in Turkey in terms of customers (5.1 million) and consumption. It is a major asset both nationally and globally, and thus expected to generate high local and international investor interest. Indeed, several major companies have already demonstrated interest in IGDAS.