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Azeri SOCAR to acquire German EWE’s natural gas business in Turkey

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Azeri state energy company SOCAR plans to acquire the energy business of Germany’s EWE in Turkey, marking its entry into the natural gas distribution market in the country, the Hürriyet Daily News reported.

“We have been involved in transporting natural gas coming from Azerbaijan with the TANAP [Trans Anatolian Natural Gas Pipeline] project which commenced last year,” SOCAR head Rövnag Abdullayev said in a written statement on Wednesday.

“Through the acquisition of EWE Turkey, we have taken a strategic and commercially very important step to fulfill all the production-transportation-distribution cycle of natural gas in Turkey,” he added.

The cost of the acquisition, not yet announced, will be finalized after approvals from the Competition Authority, the Energy Market Regulatory Agency and the Information and Communications Technologies Authority.

Turkish gas distributor Palmet was also in talks to acquire EWE Turkey. Palmet was ready to pay around 150 million euros ($170 million), a representative of the company told Reuters on Jan. 17.

EWE, the fourth-largest natural gas supplier in Turkey in terms of customers, includes Bursagaz and Kayserigaz, the gas distribution networks in the industrial cities of Bursa and Kayseri. It also includes the EWE Enerji and Enervis businesses, which are involved in energy trade and service, according to EWE’s annual report.

The Turkish market once held great promise for EWE, with Managing Director Frank Quante quipping as recently as 2015 that the division won a new customer every eight minutes. Last year EWE’s foreign activities, which include Poland but predominantly reflect the Turkish business, saw sales fall 14 percent to €624 million. Operating profit slipped 3 percent to €24.8 million, according to the German Handelsblatt daily.

EWE buys its gas in dollars and then sells it in lira, exposing the company to significant currency risks. On April 2, the lira’s valuation was around 3.96 to the dollar, while as of today it is around 5.30.

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