-- Turkey's first auction of power grids lured two foreign utilities, compared with at least eight that planned to participate in 2006, as a legal challenge to oust the prime minister and an electricity-price cap deter bidders.

When Turkey announced the auction of power lines that serve Ankara and the industrial Sakarya region near Istanbul two years ago, more than 30 Turkish and foreign companies sought details, among them E.ON AG, Germany's biggest utility, and Italy's Enel SpA. Now, Austria's Verbund and Prague-based CEZ AS are the only international companies remaining among the five bidders for each grid, according to the state asset-sales agency.

Prime Minister Recep Tayyip Erdogan is seeking cash from abroad to offset a trade deficit estimated to widen 32 percent and needs to lift power output to avert shortages as capacity fails to match rising demand. Foreign investors are backing out because of a lawsuit that may ban Erdogan from politics for Islamist policies and delays in raising power prices to compensate for rising oil and gas costs.

``It's a very poor start to the government's privatization plans for the energy sector,'' said Wolfango Piccoli, an analyst at Eurasia Group in London. ``This raises concerns for the sale of other distribution regions and about the money Turkey can raise.''

Declining foreign interest in the power grids has increased investor concern Turkey may struggle to sell power plants and its first nuclear energy license. Turkey's state asset sales are aimed at easing a current-account gap, the widest measure of trade in goods and services, that may reach $50 billion this year as oil and food prices surge.

Energy Role

The government, which sold a natural-gas grid in Ankara for $1.61 billion in March, hasn't said how much it targets for the two networks now on sale. Today's auction starts at 11 a.m. Ankara time.

The government promised the International Monetary Fund it will reduce the state's more than 80 percent share of the electricity generation and distribution markets. The Ankara and Sakarya grids together have 4.2 million customers who consume a combined 18 million gigawatt hours of electricity. Turkey has more than 73 million people.

Erdogan's Justice and Development Party is to defend itself at the Constitutional Court this week. Prosecutors want a five- year ban for Erdogan and dozens of party members and the organization's closure in a case that may last three months.

``Those who want to enter the electricity sector don't know which government they'll be dealing with,'' said Ebru Eroglu, an analyst at TEB Invest in Istanbul.

Price Increase

Erdogan's government has sold about $27 billion of state companies since 2002, more than all its predecessors combined. The grid sales were due in January last year. The government postponed them in the run-up to July elections, which it won.

The energy-markets regulator approved a 22 percent price increase last month for electricity, the second in almost six years. Natural gas, used to fire half of Turkey's generators, rose 420 percent in that period in London.

The potential cost deterred E.ON from placing a bid, said Klaus-Dieter Maubach, chief executive of E.ON Energie AG, the power-generation unit of E.ON AG.

``It's not a question of whether we want to enter new markets, but rather if we can get a reasonable price for the assets we acquire there,'' Maubach said in a June 24 interview in Munich. Roberta Vivenzio, a spokeswoman for Enel, didn't respond to a message left on her mobile phone.

Power Shortages

A lack of investment means Turkey, whose economy expanded at an annual rate of almost 7 percent since 2002, may suffer power shortages as early as next year, according to the World Bank. The government plans to issue a license in September to build its first nuclear-power plant.

Verbund, which is bidding with Turkish partner Haci Omer Sabanci Holding AS for both assets, expects Turkey to be one of the top five power markets in Europe by 2020, said Bernhard Raberger, a vice chairman at Verbund.

``In general we trust that in Turkey a competitive and liberal market is developing,'' Raberger said in an e-mailed response to questions.

Demand for electricity is growing more than 8 percent a year and will almost double by 2016, according to a report by the state transmission company.

CEZ, which wants to buy both grids with Turkey's Akenerji Elektrik Uretim AS, said electricity demand, growing about four times as fast as Europe's, make the assets attractive.

``The pricing and liberalization plans of Turkey have been considered in a bid,'' said Eva Novakova, a spokeswoman for Prague-based CEZ.

Other bidders in today's sale include Park Holding AS, which has textile and mining interests, Turkish builder Alarko Holding AS and energy company Hema Endustri. Dogan Sirketler Grubu Holding AS, Turkey's biggest media company, is competing for both grids with separate partners -- Dogus Holding AS, Unit Group and Anadolu Endustri Holding AS.