The Energy Market Regulatory Authority Imposed A Capital Increase Requirement For Share Transfers That Will Change The Shareholding Structure Of Legal Entities Holding Foreign Pre-Licenses

The Electricity Market Law No. 6446 and the Electricity Market License Regulation prohibit, as a rule, any changes to the shareholder structure of a legal entity holding a preliminary license during the preliminary license period. In case of violation of this prohibition, the preliminary license is foreseen to be revoked. However, exceptions to the rule of not altering the shareholder structure directly or indirectly are listed in the first paragraph of Article 57 of the Electricity Market License Regulation, in fourteen clauses. These clauses outline the circumstances under which changes to the shareholder structure can occur during the preliminary license period.

However, with the amendment introduced by the Regulation published in the Official Gazette No. 32635 on 17/8/2024, and later published in the Official Gazette No. 32688 on 10/10/2024, the following provision was added: "However, direct share changes planned in the clauses other than (a), (b), (ç), (d), (f), (j), and (k), as well as indirect ownership structure changes of 10% or more, are subject to the approval of the Board each time." This introduced a requirement for obtaining prior approval from the Board for certain changes to the shareholder structure, which were previously considered exceptions to the prohibition.

The Energy Market Regulatory Authority ("EMRA") introduced an obligation to increase the minimum capital of the legal entity holding the preliminary license when certain changes to the shareholder structure occur. This was published in the Official Gazette No. 32717 on 09/11/2024, under the Board Decision No. 12993 dated 07/11/2024. The changes are related to the following provisions of the Electricity Market License Regulation:

- In paragraph (c), it is specified that if indirect ownership changes occur in the shareholder structure due to changes in the structure of foreign shareholders, a change of 10% or more by adding a new shareholder to the structure is required to increase the minimum capital.

- In paragraph (g), regarding direct or indirect share changes made without creating a control change in the shareholder structure, if shares are transferred to foreign entities, the minimum capital increase requirement applies.

- In paragraph (ı), when direct or indirect share acquisitions are made by foreign entities or those controlled by such entities, or by legal entities established under the Turkish Commercial Code No. 6102, using foreign resources, the minimum capital increase is also mandated.

Accordingly, the legal entity holding the provisional license is required to increase its paid-in capital by 25% of the total investment amount related to the main source, in addition to its current paid-in capital, within six months from the notification date of the board decision regarding the approval of the share transfer, regardless of the share transfer ratio. The relevant information and documents regarding this increase must be submitted to the Energy Market Regulatory Authority (EMRA).

In calculating the amount of paid-in capital, unit investment amounts based on the main source and mechanical installed capacity (MWm) are determined as shown in the table below:

If the share transfer transactions subject to approval are completed, and the capital increase obligation is not fulfilled within the specified period, the approval will be considered invalid, and the provisional license will be revoked under Article 57 of the Electricity Market Licensing Regulation.

Moreover, the increased capital amount cannot be reduced below the specified amount until the production license is obtained. Otherwise, the approval will again be considered invalid, and the provisional license will be revoked under Article 57 of the Electricity Market Licensing Regulation.

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