In West Africa, Aksa Enerji, a Turkish power producer, announced a deal to build and operate a 370MW facility in Ghana under a five year power purchase agreement, reported Bloomberg this week.
Aksa Enerji, Turkey’s second largest electricity producer in which Goldman Sachs holds a 17% stake, is seeking to construct as many as six power plants in Africa. This is due to tight domestic margins, which is causing losses on its dollar-denominated debt.
Tight profit margins
Cuneyt Uygun, chief executive officer of the Istanbul-based company, told Bloomberg that margins on producing electricity in Turkey have tightened due to the government not increasing electricity tariffs for the past two years.
Turkey produces nearly half of its electricity from imported natural gas and the lira’s 16.3% depreciation against the dollar this year is widening the gap on power companies’ debt in dollars.
Uygun explained: “Tight profit margins in electricity production industry in Turkey are forcing us to invest in other markets through dollar-denominated deals.
“About 80% of Aksa Enerji’s $700 million total debt is in dollars.”
Aksa Enerji enters African market
Investments in Africa will help offset losses of Aksa Enerji, which has a total production portfolio of 2,300MW on its dollar debt, Uygun said.
He declined to comment on the size of the company’s planned Africa investments, stated Bloomberg.
Aksa Enerji’s deal in Ghana includes building the power plant, which will burn heavy fuel-oil and operating it for five years from the end of the first half of next year.
The company will then sell power to Ghana on a dollar-based power purchase agreement, according to a public filing.
Aksa Enerji’s first-quarter loss widened to $39.1 million in the first quarter after a loss of $4.2 million a year ago.
The Turkish Public Disclosure Platform stated that: “This agreement has been approved by the parliament of the Republic of Ghana and preliminary conditions are waiting to be completed, such as letters of credit, approvals of operation and production licenses from the authorities.”