The sale of Turkish natural gas distributor Baskent Dogalgaz to MMEKA Makina Ithalat Pazarlama ve Ticaret AS has been cancelled after the joint venture failed to pay the $1.2 billion it bid for a 80% stake in August, Turkey 's privatization agency said Tuesday.

"MMEKA has failed to accomplish its duties stated in the tender specifications, including payment of purchase amount, and collateral of $92.6 million provided for purchase of Baskent Dogalgaz," the privatization agency, or OIB, said in a statement.

The agency added that it would re-auction the 80% stake in Baskent Dogalgaz, the capital's natural-gas grid, "as soon as possible."

Turkish Finance Minister Mehmet Simsek told Turkish television channel CNBC-e that there is "no chance" of avoiding cancellation, and said the tender will be re-auctioned "this year."

Earlier Tuesday, MMEKA Chairman Mehmet Kazanci told Dow Jones Newswires he would "shortly" make a statement responding to media reports that his firm was unable to pay. Kazanci didn't respond to repeated calls for comment after the OIB statement was published.

MMEKA, a venture between Turkish businessman Kazanci and Turkcell AS (TKC) founder Mehmet Emin Karamehmet, offered a top bid of $1.2 billion for Ankara's 80% stake in the Baskent natural gas network in the capital, Ankara. Turkish media have reported repeatedly that Kazanci and Karamehmet have clashed over business plans for Baskent Dogalgaz, but these reports couldn't be confirmed.

That followed the conglomerate's $5 billion bid in August to operate nearly 20% of Turkey 's power grids. It wasn't immediately clear whether that bid could also be scrapped.

Turkey has steadily privatized state utilities in recent years in an effort to bolster public finances and increase capacity, as the country's economy expands and incomes rise.

The ruling AK Party sold the country's electricity grids and sole refiner Tupras in 2005 and has said it intends to sell power stations from 2011 to raise another $15 billion.

Turkey's move to sell off state assets to boost efficiency and bolster its relatively healthy public finances contrasts with the privatization strategy of many governments in Europe, which are looking to shed stakes in state-owned companies to pay for debt accrued during the financial crisis.

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