Listen: Attila Kirk Attila, Turkey, United States discussed on My Worst Investment Ever Podcast
"The heavily. Regulated industry is difficult industry to be operating in natural gas prices are set by the government energy price. Ascetic trista prices are set by the government to you only have control on your production and nothing. Yes, you can determine your price. You can't determine your input price. You can't bargain. There's nothing you can do. He started losing money. Hello, fellow risk-takers. Welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win an investing. You must take risk but to win big you've got to reduce it. My name is Andrew Stotz from a Stotts investment research in. I'm here with featured guests Attila Kirk Attila. Are you ready to rock? I am ready. Let's go. All right. Let me tell the audience a bit about your background having graduated from Bosphorus university department of mechanical engineering in one thousand nine hundred three Attila received an MBA degree from Drexel University in beautiful Philadelphia in nineteen eighty five between nine hundred ninety one and nineteen Ninety-six Attila served as general manager at inter yacht. Terim and between nineteen Ninety-six in two thousand one he worked as a CEO of the same company from two thousand and two. Until two thousand thirteen Attila has been acting as general manager of Dundas under standard and now unlearn company under its new title. Mr. Kirk song is currently a member of the board of directors of earner securities in previous years. He also served in as the capital markets association, chairman board of directors of the institute, which is where I really got to know Attila. He's also vice president and financial literacy association of Turkey fodder while come to the show, take a minute Attila and fill in a little bit of tidbits about your life. While thanks for inviting me here is always painful to talk about your, you know, bad investments by hope it helps other business so that they learn some are bad experiences. So I'm message banker I've been in banking for almost three decades now, so I'd be. Enjoying every moment of it. I I have two children. They just started university in the US. So my daughter is at pending UCLA, and she majoring in coordinating sciences, and my son goes to Brown University studied pre-med, so he wants to become a medical doctor. So none of them chose line as efficient as I did. But I am he had choice and you all the luck. And I'm based in Turkey's fumbled token, except for the first few years of my career that I lived in the US. I started in Princeton New Jersey as financial analysts. I've been here before almost thirty years served in touch in an emerging market emerging, Mike. So I have a lot of those beds investment, they experienced today's diverse. Okay. Well, let's get into it. It's time to share your worst investment ever. And since no one goes into their worst investment thinking, it will be tell us a bit about the circumstances leading up to it. And then tell us your story. Okay. So this was a personally messing with six other friends of mine, you know, be gathered an investment club, basically at in the past done. Some really successful investments. Probably gained confidence that we shouldn't deserve and into this. Invest. In year of two thousand seven so we decided to invest into the energy secretary post Turkey severe power shortage at the time our generation shortage, and we decided to get together and invest into this generation plant based what happens is people three machines of megawatts each and of for megawatt generation, capacity. Our input would be natural. Yes. And are all put would be elected city, and Steve and we would sell the electorate city to either to companies or to the grid. There is a countrywide Knicks ingredient Turkey like in many other countries and steam, we will sell mostly to local companies and close to our plant, but it's of course, very difficult to transport the steam at the time. It looked like a very reasonable investment and vetoes the tunnel of entendre, which is southern Turkey. It said tourism, Tom and civilian, vibrant, Tom. There are lot of hotels, amusement parks. And the town you see the millions of tourists in every year and in the summer season, especially it's a very vibrant city active city and at the time the severe power shortage to about fifteen million hours per day. We decided to set up this land, which would produce hundred million kilowatt hours earlier, basically six days of need of anti and many other companies other plans neither so we talked you know, we could output easily. We bought this land in an industrial zone on higher. So that we would be close to some manufacturers to whom. He would sell our steam because this so generation lands are more profitable. If you can also sell the steam steam is a byproduct if you sell it, you get some additional revenue next to the electric sounds like a huge project. But was like, it's not. It's not a huge project because they were no fuss. They've been funding the project without personal tapings. So it's not huge. But for us. It was a sizable investment sorry. But it would be lost. There was painful in this only fourteen address megawatts or not nothing too big. Of course, it won't us. I mean, we'll be all lost is like really sizable amount of saving so Bill. Also leverage leveraged, we won't have you more of from banks or us about sixty percent leverage. And they bought this plant, and we will also bought the land in this industrial song setup the plant. So the idea was initiated in two thousand seven so it took us three years to get it going in the year of two thousand ten production resume them, you started selling it existed of the degrees and heavily regulated industy. Of course, like in many other. The country's energy market today. Glitterati authority that defines all rules and also days said, they determine the prices of electricity. It has demanded on supply McKenna's Eum, also, but occasionally energy big later in into beings and determines the price and the natural gas price is mostly determined to because we import natural gas mostly from Russia, and there are a grievance between the two countries, but domestically again, the natural gas price is set by the government. So basically the after we started operating realized that is heavily. Regulated industry is the difficult industry to be operating in because natural gas prices are set by the government and energy prices. Trista prices are set by the government to you only have control. On your production and nothing else you can determine your price. You can't determine your input price. You can't bargain. There's nothing you can do since two thousand ten the country has gone through many years of elections. I mean, we had some like political local elections locally and every election that are populistic advocate by the government or ballistic moves by the government. And sometimes they don't increase the electricity price as much as they should. Sometimes they increase the natural gas price at ball the electricity price or like margin becomes negative. So we started like short in summary. We started losing money. So I guess cost us more than the electricity selling and steam. We couldn't fail. Time. The economy was like slumming manufacturers up air productions our team. So all of them. You saw that we've been started losing money. And actually when we first started. This wasn't an ambitious project. You know after doubling our money or make a huge returns are IRR target was anywhere from like ten to maybe eighteen percent like big leverage. So it wasn't that too ambitious. Perfect for us. It was a project by in Lynnwood get like nice annually. Turn that would supply our annual income. We never taught of investing your end selling a two times or three times. But of course, it turned out to be very painful investment. And so we decided to exit but that warrant any by the time, and if you also all the Bank issue students amount of money as we stopped production because was negative margin. Business topping production must better eventually he started looking"