TURKEY

1. INTRODUCTION TO THE ENERGY MARKET

Due to its remarkable economic growth over the last decade, Turkey's energy demand has considerably increased. In order to meet this growing energy demand, Turkey's energy policy for the next ten years includes the following targets:

  • increasing total installed power to 120,000 MW;
  • increasing the share of renewable energy sources to 30%;
  • establishing an energy exchange;
  • commissioning at least two nuclear power plants; and
  • minimizing its costs for importing petroleum and gas1.

Turkey's targets show that energy demand and development of the energy market will not stop2. Currently, Turkey's domestic resources meet approximately 28% of its total energy demand. Due to insufficient domestic energy generation, Turkey's primary objective is to strengthen its security of supply. Turkey is determined to diversify its energy supply routes and sources, by including nuclear energy in its generation bundle and increasing the share of renewable energy. Considering Turkey's targets for the next ten years and the substantial increase in energy demand3, it is clear that significant investment (more than double the total amount invested in the last decade) is required to meet energy demand by 2023. e share of renewable energy sources to 30%;

2. ELECTRICITY

2.1 Market overview

The Turkish electricity market is one of the fastest growing electricity markets in the world, with an approximately 9% annual increase on average. In the electricity market, in addition to private companies, there are four active state-owned companies:

  1. Elektrik Üretim Anonim Şirketi ("EÜAŞ"), the state generation entity;
  2. Türkiye Elektrik İletim Anonim Şirketi ("TEİAŞ"), the state transmission entity;
  3. Türkiye Elektrik Ticaret ve Taahhüt Anonim Şirketi ("TETAŞ"), the state trading entity; and
  4. Türkiye Elektrik Dağıtım Anonim Şirketi ("TEDAŞ"), the state distribution entity.

While the state generation entity, EÜAŞ, still has an important role in this market, the role of private entities is rapidly increasing through both privatizations as well as new facilities. TEİAŞ is a monopoly in electricity transmission. It conducts all of Turkey's transmission activities. Apart from transmission activities exclusively conducted by TEİAŞ, the market is fully accessible to private companies. The distribution network is divided into 21 regions, with a different distribution company in each. All of these companies have recently been privatized. TEDAŞ no longer operates any distribution company, but continues to own the distribution assets. The electricity distribution market has been completely privatized as of 2013. Meanwhile, power plants operated by EÜAŞ are still being privatized4.

The new Electricity Market Law5 (the "EML") introduces the electricity exchange, which is envisaged to be established at the end of 2014. A new company, EPİAŞ, will administer this electricity exchange.

According to its draft articles of association, EPİAŞ' shareholding structure will be as follows:

30% will be owned by TEİAŞ; 30% will be owned by the Istanbul Stock Exchange (the "ISE"); (iii) 30% will be owned by private energy companies; and (iv) 10% will be owned by the ISE, provided that it will transfer this 10% to a strategic partner.

According to market studies, the creation of an electricity exchange market will create a whole new market of its own and attract foreign investors to Turkey, which will further increase international competition in the energy sector.

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© Kolcuoğlu Demirkan Attorneys at Law, 2014

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