Turkey: Energy Privatization In Turkey And Strategic Importance

Last Updated: 19 November 2014
Article by Engin Düzgün and Burcu Kırancı

The main philosophy of privatization in Turkey is state's providing justice and security which are its fundamental chores, and undertaking infrastructure investments which cannot be undertaken by private sector, also the managing of the economy through market mechanisms.

With privatization; the minimization of state roles in industrial and commercial are targeted and thus, development of free market economy which based on competition, soothing of state economic enterprises' financing pressures on economy, advancing of capital market and regaining of idle savings will be possible by canalizing sources to infrastructural investments through privatization.

In IX. Development Plan, which creates a general reference frame for institutions for next term by according to national policies, the main philosophy is defined as state's retreating from economic activities and creating policies which are to strengthen regulatory and supervisory mechanisms. For enabling state to focus on its main tasks- regulation and supervision; state's leaving partly or wholly from some economic activities is stipulated for the next term. So, these policies constitute the core of the privatization practices.

In IX. Development Plan

  • Sectors regarded to be left by the state wholly: sea and air transport, wagon and locomotive manufacture; sugar, tobacco and tea processes; petrochemical industry, equipment purchase, wholesale and distribution of electricity.
  • Sectors regarded to be left partly: power generation, natural-gas market, coal and other minings

In 2011-2013 middle term plan, the privatizations which are going to be implemented by Privatization Industry is mentioned.

In the Plan, retreating wholly from the distribution of electricity and sugar production; and retreating partly from the power generation, telecommunication; harbor, motorway and bridge management is targeted.

In the course of leaving the economic crisis's sphere of influence, by taking the advantage of strong parts of our social and economic structure, program's main aim and reform area is defined as enabling our economy into a sustainable growth period again, thus prospering our country.

According to 'Reform of Electric Energy Sector and Privatization Strategy Certificate of 2009', the main target is to provide electricity adequately, constantly and with high quality and low cost to all consumers. In accordance with this aim and EU Acquis Communautarie, the liberalization of electric energy sector will continue.

On the other hand; among the regulations aiming the implementation of economic criteria, which are in the core elements of accession period conducted concurrently with EU adaptation of standards, there are some articles which may affect privatization activities directly. In compliance with the decision of European Court of Justice, one of these is adopting the utilization of golden share; and the other is removing restrictions on foreign capital.

The golden share defined by European Court of Justice, the criteria regarding foreign capital and public-private collaboration will help state to enter a regulatory and supervisory consideration. Accordingly, since the alleviation of restrictions on golden share and foreign will grow the interest to privatization, this will push privatization tenders to more competitive atmosphere and pickup problems arising after privatization.

In EU Acquis Communautarie, collaboration of some investments and services' with private sectors is underlined. When the arrangements of these practices, which are growing throughout the world, are actualized in our country, too, compliance with EU and other contemporary norms in services and investments sectors can be procured.

The main target of privatization is to retreat state from the management area completely. On the other hand, it is not possible to mention a healthy economic improvement before the development of stock exchanges and capital markets. Without not solely being connected to banking sector, companies should provide sources through the export of stocks, bonds and bill of exchanges. So, if a healthy balance with this resource cost and inflation is desired, then the capital markets should be developed. The development of capital markets is possible through the direction of more of the savings to the financial markets and thus creating an economic structure that will allow the flow of these cumulating funds into the capital markets.

When considered from this point of view, with privatization practices both creating new financial sources to financial markets, thus to capital markets, which do not tend forwards to domestic and foreign source; and stopping negative pressure arising from the public demand of funds is aimed.

The most important item of Turkey's privatizations is the privatization of the energy plants and electricity distribution companies since energy is regarded as the partaking of a country's economic and politic power as well as in the international arena.

In Turkey, the operational fundamentals of electric market are defined by Electric Market Law, no 4628 which went in effect in 2001. Additionally, with Electric Market and Supply Security Strategy, a draft was made for the liberalization in sector and supply.

In the upcoming term, because of the development in conjuncture in which Turkey takes place, too, it has been thought that both this strategy certificate and Law no 4628 needs serious modifications. That is why for whom to invest in energy sector, it is contemplated that there are more suitable conjecture in near future.

Official aims as outcomes of liberalization of electric market and privatization is given below:

  • To procure a competitive market
  • Increasing generation and distribution efficiency
  • Encouraging necessary investments for long term supply safety
  • Making state as a regulatory body by diminishing public sector's significance

As a part of this thread of aims, Turkey makes very important energy privatizations.

In the year of 2012, by Privatization Administration there will be significant energy premises' and energy distribution companies' privatizations. To give general examples, tender processes has been started for the privatization of 26 hydroelectric power plants and 18 fossil fuel plants and the tender process has been started first stage technic and financial consultancies. Probably, privatization tender processes will be started after the end of the second quarter of 2012. 21 other hydroelectric power plants will be added to privatization scope if those plants' transformation processes cannot be completed on time.

In regard to privatization of these energy generation facilities and distribution companies, investor companies should note some subjects.

First of all, they should project economic, political and strategic benefits expected well; short, middle and long term benefits should be envisioned from different point of views.

If we were to say more clearly, the titles given below require strict work from the companies that wants to be involved in privatizations:

  • How the electric generation facilities are to be privatized or should be privatized
  • The analyses of current conjecture of electric generation sector in the world and in Turkey, short-middle and long term changes/developments expected and biases of sector before/after the privatization
  • The additional required investment after the privatization of the electric facilities that are named
  • Especially by keeping in the mind the crisis which is sweeping Eurozone and obligation of European investments' move to East; the conjectural structure of national and international financial markets, domestic markets, sectoral and economic development should be studied well.
  • In fossil fuel plants, study of fuel reliability, the issues like whether the fuel provider sites should be privatized along with the facilities or not must be studied well. (This title has a strategic importance in regard to Turkey's relations with Iran, Iraq and Azerbaijan and Russia.
  • For electricity purchases and sale agreements, natural gas provision agreements, coalfield usage agreements, water usage agreements and other necessary agreements that has to be prepared before/after the privatization, judiciary preparations that to be in compliance with Administration should be made in this process
  • Additionally, if there is mean to privatization process; beginning to technical, financial and judiciary studies and constant contact with the administration will be a good benefit to the investors.

(It should be noted that in Turkey beginning from 2012, all business and corporations; and beginning from 2015 all consumers should be regarded as free consumers.)

In consideration to strategic place that Turkey has gained both its own region and in the world, especially in last ten years, clarifying Turkey's will to share the power that it gained through its strategic strength and position on energy corridor would not be realistic in regard with economic data.

Especially, the privatizations will be more meaningful when thought in regard to energy sources and these powerful countries' fight for each other for these sources.

With Southern Gas Corridor which Turkey allowed Russia and Europe's hope - Nabucco Project will be completed if there is not a new incoming maneuver. In addition, the statement by Barack Obama, USA President, "We will not execute the wars in the world anymore" is extremely important. This will bring a serious change in the region and European energy zone and underline Turkey's importance in World Energy Corridor.

Footnotes

1 http://www.duzgunkirancilaw.com/page/turkey%E2%80%99s_strategic_importance_in_world_energy_corridor-35.html

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions