Energy market is one of the most preferred markets by investors.
Especially within the opening of the energy market to competition
to a large extent and the support of energy investments through
financial incentives, Turkish energy market attract investors'
attention in recent years. Since Turkey's energy demand and as
a conclusion of this, the energy import volume grow rapidly,
investments in energy production and energy trade have gained
Conditions for company establishment
An investor may invest by establishing a company, or through
merger or acquisition of an energy company in Turkey. Pursuant to
the statistics, the M&A transactions in electricity
manufacturing, transmission and distribution activities have taken
the first place regarding the transactions' number and value.
The Electricity Market Law and Natural Gas Market Law set forth
different terms and conditions for both investment types.
Accordingly, an investor shall consider these terms before taking
his/her investment decisions. Important is, that the company's
type, capital and license for its market activity shall be in
accordance with the related legislation. In this regard, the
conditions in Commercial Code and related energy market law may
have differences, for instance the minimum capital requirement of a
joint stock company operating in natural gas import shall amount to
TL 4.000.000,- whereas the minimum capital of a joint stock company
is generally TL 50.000,-.
Company establishment and license obtaining is not required for
electricity manufacturing from renewable resources such as solar,
wind, biomass and geothermal energy under certain conditions.
Moreover, the investors may benefit from diverse opportunities such
as feed-in tariffs and local equipment support. In Turkey, the
number of such investments has increased rapidly since last years.
For example, the first unlicensed solar power plant has been
established in 2013 and as of 2014, the number of applications for
unlicensed electricity manufacturing has become more than 2000.
Unlicensed electricity manufacturing is advantageous especially for
household and factories to produce their own electrical energy.
Alternatives for energy market activities
Investors which intend to operate in energy market have numerous
investment alternatives. Since especially the electricity market
has been opened to private sector companies to a large extent, an
investor may operate in nearly all market activities under the
condition that he/she obtains a corresponding license. Currently,
electricity and natural gas distribution are operated by private
sector companies to a large extent whereas transmission is still
under states monopoly. Within the decrease and the removal of
eligible customer's limit which is intended to be realized in
electricity market and natural gas market in the near future, it is
expected that the volume of energy trade will increase
Opportunities from which investors may benefit
As mentioned above, investors may benefit from incentives such
as feed-in tariffs in renewable energy manufacturing. In addition
to this, there are diverse international energy projects in natural
gas and nuclear energy sectors. TANAP, one of the biggest natural
gas pipeline investments in Turkey attracts attention of domestic
and foreign investors from its beginning. Currently, the
transmission of natural gas from İsrael to Turkey is topical
and the possibility exists that this natural gas pipeline may be
connected to TANAP pipeline. Foreign and domestic firms may benefit
from the opportunity to participate in tender processes of such
projects for different purposes such as to take part in procurement
for pipeline construction.
Financing of a project is another question of investors which
come to the fore frequently. Since energy investments, especially
in renewable energy plants with new technology may cause high
costs. In this regard, banks, other finance institutions provide
different type of credits to energy projects especially in
renewable energy in Turkey depending on the type, subject and value
of the project. Since the electricity manufacturing from renewable
energy projects has not reached the energy manufacturing target of
30 % yet, the financing of renewable energy projects plays an
essential role for support of new renewable energy technologies and
to increase the share of renewable energy resources in the
electrical energy production.
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.
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Turkey has amended the Electricity Market Law numbered 6446 to promote use and security of domestic energy resources. Under the amendments, planned capacity mechanisms must give priority to local energy sources.
Turkey's energy regulator previously ruled (decision numbered 5709, dated 30 July 2015) that a total capacity of 2,000 MW would be reserved in the period up until 2020 for wind power pre-license applicants to connect to the grid.
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