Turkey Power Market Report Q1 2013

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Turkey Power Report Q1 2013
http//www.rnrmarketresearch.com/turkey-power-repo
rt-q1-2013-market-report.html
Despite the fact that several of Turkey's
economic challenges - including a significant
currentaccount deficit, elevated inflation and
high cost of credit - have not dissipated yet,
various macro andsector-specific indicators
signal that Turkey is undergoing a gradual
rebalancing of its economy. While asharp decline
in economic activity in 2012 has taken its toll
on power consumption, we remain optimisticabout
the power industry's growth potential. However,
we highlight that plans to increase
coal-firedgeneration appear to reflect a
political move, rather than any long-term energy
strategy.With our view for a sharp decline in
economic activity in 2012 having played out, we
have downwardlyrevised our growth estimate for
the country's power sector for the year. We
believe that electricityconsumption saw real
growth of 6.89 year-on-year (y-o-y), down from a
previous forecast of 7.90.
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We believe that generation growth came as close
in growth terms, reaching 6.87.As highlighted
in previous analysis, though not out of the woods
yet, the Turkish economy seems to haveturned a
corner. The Turkish authorities have thus far
successfully steered the domestic economy
awayfrom a hard landing, with evidence of a
rebalancing away from an overreliance on domestic
demandtowards a greater focus on exports and a
more welcoming monetary policy. Coupled with
diminishingdemand-side inflationary pressures,
these factors support not only a brighter
short-term outlook for thecountry's power market,
but also reinforce our relatively bullish view on
the power industry's growthpotential- especially
when compared to expectations for power markets
in Central and Eastern Europe(CEE).   Request
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With this in mind, we highlight that decisions
regarding the country's capacity expansion plans
and thefuture shape of its energy mix will be key
in defining opportunities, most notablyThe
government's decision to approve natural gas and
electricity price increases in October
2012creates upside and downside risks to our
outlook. Designed to support public finances, the
movecould also incentivise investment into the
sector, improving the stance of power generators.
Yet,we note that the hike is set to have an
impact on inflation and could also have negative
effects onpower demand.A certain degree of
confusion has emerged in the thermal segment,
following repeatedannouncements by the government
that tenders for five to six gigawatts (GW) of
new coal-firedplants could be opened soon.
However, we judge this to be a political move
rather than a longtermenergy strategy and
question the viability of this push.   Buy your
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