Turkish Electricity Market
For more information regarding potential investment opportunities in the Turkish electricity market, a law firm should be consulted.
This summary aimed to shed light on the electricity segment of the energy sector in Turkey. We turn the spotlight on independent producers, as companies in this fast-growing segment are competing to make new acquisitions or project announcements almost daily.
In the past, poor economic conditions and high public debt levels have pushed public investments in the electricity sector on to the backburner. High rates of consumption increases, insufficient capacity expansion and very little stimuli to increase efficiency translate into the threat of a power shortage by 2009. However, the high price tag (we estimate about USD31bn) has pushed debt-laden governments to turn to the private sector and make the necessary legal changes to encourage them.
Since the 1990s, private sector has been involved in power generation by signing long-term concession-based agreements under build-operate-transfer (BOT), transfer of operating rights (TOR) and build-operate-own (BOO) arrangements and operating independently.
- Independent power producers was neglected for years by the government, however, the looming electricity shortage underscored the importance of independent producers for the sector. Despite having seen their margins disappear between two administered prices, electricity and natural gas, private companies have been announcing significant new capacity additions in anticipation of a better working environment.
- There is good news for independent generators. Government increased regulated electricity prices, also considering to introduce an automated pricing mechanism, the need for capacity is ever increasing, and distribution and generation privatizations are about to kick off.
- Government will be putting out tenders of electricity distribution, which is the priority, and electricity generation soon. Note that, on the distribution side the tender process for first three regions was postponed indefinitely in 1Q07 amid fears of a political backlash in the election year. Nonetheless, the new government’s programme refers to liberalization of electricity market through privatization of distribution companies and electricity generation assets. Hence, we expect some new developments on this front soon.
- New nuclear power plant law issued for at least 4000MW of capacity. Tender schedule just started and the proposal will be submitted until September 2008.
Turkish Electricity Market
Regulatory Authorities in Turkey
- Turkish Electric market has undergone significant structural changes in the last 15 years. As a first step toward a competitive market, new electricity market law of 2001 re-organized state owned utility-TEAS into three successor companies, namely Electricity Generation Company (EUAS), Turkish Electricity Transmission Company (TEIAS) and Turkish Electricity Trading and Contracting Company (TETAS). The law also established a new entity to oversee all energy market activities in Turkey, Energy Market Regulatory Authority (EMRA).
- Any prospective investor or company must apply to Energy Market Regulatory Authority- EMRA (www.emra.org.tr) to obtain a license in which to develop and operate an energy facility.
Electricity Market Regulatory Authority
- The Electricity Market Regulatory Authority had been established as per Law no. 4628 and it was later renamed as Energy Market Regulatory Authority as per the provisions of Natural Gas Market Law no. 4646. With the enactment of the Petroleum Market Law no. 5015 and Liquefied Petroleum Gas (LPG) Market Law no. 5307, the Authority has been commissioned to regulate and supervise the petroleum and LPG markets. Members of the Energy Market Regulatory Board assumed duty on November 19, 2001.
- The objective of the aforementioned Laws is to establish a financially viable, stable and transparent energy market, which will function as per the provisions of private law and within a competitive environment to ensure the independent regulation and supervision of the market in order to provide sufficient electricity, natural gas, petroleum and LPG of good quality to consumers, at low cost, in a reliable and environment friendly manner.