The Regulation Amending the Natural Gas Market Licensing Regulation was published in the Official Gazette dated 17 April 2018 and numbered 30394 (the "Amending Regulation"). The Amending Regulation introduces several amendments to the existing Natural Gas Market Licensing Regulation published in the Official Gazette dated 7 September 2002 and numbered 24869 (the "Licensing Regulation") primarily concerning the authorised licensing body different types of natural gas market licences and regulatory requirements on changes of ownership.
Authorised Licensing Body for Different Types of Licences
The Energy Market Regulatory Authority (the "Authority") is the authorised licensing body for the natural gas market.
Article 6 of the Licensing Regulation lists seven types of licences which can be obtained in the natural gas market which are as follows: i) import, ii) transmission, iii) storage, iv) wholesale, v) distribution, vi) compressed natural gas (CNG) and vii) export licences.
The Amending Regulation amends the defined term "the Board/the Authority" in the Licensing Regulation to allow different types of licences to be issued by different bodies within the Authority. Previously, all licences were required to be issued by the Board of the Energy Market Regulatory Authority (the "Board") which is the management body of the Authority.
Going forward, wholesale, automotive LNG wholesale, CNG and transmission (LNG) licences will be issued with the approval of the relevant directorate of the Authority. However, import, export, distribution, storage and pipeline transmission licences will still need to be issued with the approval of the Board.
It is expected that the changes will help reduce the workload of the Board and shorten the overall approval timetable for licence applications.
Changes in the Amendment Fees
Article 14(4) of the Licensing Regulation concerning the fees to be paid when amending the existing licences has been amended to include an exception for share transfers made by distribution companies to municipalities or municipality entities. Accordingly, if the shares of a natural gas distribution company are transferred to a municipality or a municipality entity, then the associated licence amendments will not be subject to licence amendment fees.
New Share Transfer Exemptions
As a general rule, any change in the ownership (whether direct or indirect) of 10%1 or more of the share capital of any natural gas market licensee (and any share acquisition/share transfer by an existing shareholder which results in that shareholder holding or ceasing to hold more or less than the applicable threshold) is subject to the approval of the Board pursuant to Article 42(1) of the Licensing Regulation. Article 42(3) of the Licensing Regulation expands the requirement to seek regulatory approval to include the creation or removal of preferred shares, issuance of dividend participation rights and transfer of preference shares.
The Amending Regulation introduces the following new exceptions to regulatory approval requirements:
- transfer of the preferred shares of an existing shareholder in the licensee to another existing shareholder which holds preferred shares regardless of the percentage of shares being transferred, provided that such transfer does not result in the transferor ceasing to be a shareholder of the licensee; and
- transfer of preferred shares in legal entities which are direct/indirect shareholders of a licensee, except for share transfers which fall within the scope of Article 42(1).
The aforementioned transactions will need to be notified to the Authority by the licensee within 60 days.
Additionally, the Amending Regulation provides that regulatory approval requirements will not be applicable on transfers to municipality or municipality entities and shareholding structure changes as a result of a share capital increase effected by an indirect shareholder. These changes will only need to be notified to the Authority together, where necessary, with a request for an amendment to the affected licence.
1. 5% in publicly traded entities.
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