Turkey: A New Era For Turkish Energy Market: EPIAs

Last Updated: 30 March 2015
Article by Safak Herdem

In last 10 years, energy experts have been working keenly on the establishment of a new private and competitive electricity market in Turkey. Following the amendments of Electricity Market Regulation law no.6446, 7 years ago, licenced energy companies commenced to merchandise on the market with high profit and loss rates. For a period of 5 years, this risky but charmingly high-profitable market appeal investors to participate and make investments on electricity trading companies. Participants have been signing bilateral agreements with each other and also with out-of-state companies in order to make cross-border trading. However, the regulatory authority of Energy, EMRA has announced the establishment of a new privateCompany named ''EPİAŞ'', which is authorized to manage and control electricity merchandise throughout the Country.

Establishment of EPİAŞ is an essential step for the development of the market with the aims of managing a transparent market, stabilizing the prices and boosting reliability by avoiding big market price fluctuations.

Establishment stage and company shares

In conjunction with the assignment of the administrative board of EPİAŞ, Company's responsibilities and authority borders are determined judicially. EPİAŞ is authorized as the management body of Turkish Electricity Market under the force of Istanbul Stock Exchange Market.

EPİAŞ has been established as a joint-stock company according to Turkish Commercial Code rules with 61.572.779 Turkish Lira of total capital. Company shares are divided into 3 parts. Type A shares are bought by TEİAS (official Electricity Transmission Company) and BOTAS (official petroleum pipeline corporation) equally by %30; Type B shares are purchased by BIST (Istanbul Stock Exchange) by %30.

Rest of the %40 of the shares are namedas Type C shares and are bought freely by private energy companies. Companies willing to share in are obliged to obtain a supplying license or a generation license in electricity market; or obtain a wholesale-retail sale license or import-export license. Unlicensed generation facilities are not allowed to be a shareholder of EPİAŞ.

Main rule of the share purchasing is that companies are entitled to purchase %4 of shares at most. This limit of %4 basically prevents the market from monopolisation by boosting competition. At the moment 97 Companies are applied for purchasing shares. Currently, main agreement of the company is being signed by each of the shareholders under the rules of Commercial Code. After the registration of shares, EPİAŞ is going to be ready for following operations.

According to board's resolution, share profit equals to capital's %10 will be covered as a reserve fund and the rest will be paid dividend to the shareholders. Company is waiting for the registration of the shares in order to apply for a management licence.

Subject of Activities

Main activities and duties of EPİAŞ is explained as follows:

  • Operating electricity transactions both in day-ahead market and daily markets
  • Making financial reconciliation of the operations that are made in these markets and managing payment, invoicing and other financial activities.
  • Operating financial activities in stabilization & reconciliation market and ancillary services markets together with TEİAŞ.
  • Working through establishing new organised whole-energy markets,
  • If appropriate, representing the State as a party in international financial energy conventions or agreements; also being a member in international energy markets.

General objectives and importance of a new energy market

At the first stage, EPİAŞ aims to commencing activities in Electricity Market undersupervision of SPK (Stock Exchange Commission) and EPDK (Energy Market Regulatory Authority). As said above, EPİAŞ is established as a private corporation, since %40 of the shareholders are private companies. Avoiding State's monopoly is a big step in favour of building a dynamic economy. Private shareholders will have a force in general assemblies of the company.

EPİAŞ, meanwhile, is working on setting up a futures exchange option for the participants familiar to stock exchange market. Futures exchange market is considered to be ready for service in 1-2 years after the establishment is completed.

Tariffs of the energy will be determined automatically and transparently in EPİAŞ stock market with proportion to supply and demand of electricity. Basically, increasing supply rates will reduce the energy prices, while increasing demands will cause the prices to increase. This feature of the reliable market will hinder manipulations made by big public or private enterprises. At this period, financial agreements signing in the EPİAŞ's Internet system will play a big role for the trades unlike today's bilateral energy trading contracts.

EPİAŞ is going to be the centre of electricity, in 2 years; same progresses will be made in favour of natural gas market as well.

International benefits

EPİAŞ's main goal is to create a transparent, economically dynamic, liberal and reliable market for energy trades. These features mainly impress cross-border investors to get in the Turkish energy market as a participant. Especially neighbouring countries like Iraq and Azerbaijan who own surplus natural gas intrastate are waiting for this reliable market to go into action in order to export their energy. Moreover, State of Georgia, also getting ready to signing contracts in EPİAŞ system to export their surplus electricity generated from hydro-sources. International investors and States will be able to be participants in the new energy market.

Since Turkey is a foreign-dependant country regarding energy trade, this new market model seems as a vital way to charm investors.

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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Safak Herdem
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