On June 4 2016 the Turkish Grand National Assembly approved Code 6719 (the Amending Code) which amended the Electricity Market Code 6446 and several other codes. The Amending Code was published in the Official Gazette and entered into force on June 17 2016. The amendments are likely to have significant implications for the Turkish energy market. Further, on April 29 2016 an important regulation regarding the renewable power sector was enacted (the Amending Regulation).
The Amending Code authorises the General Directorate of Mineral Research and Exploration to:
- carry out prospection operations abroad;
- incorporate companies in foreign countries to conduct these operations;
- enter into partnerships in foreign countries with legal entities or natural persons (whether Turkish nationals or not);
- be a privileged shareholder;
- buy and sell shares, stock certificates and other partnership shares; and
- open agency offices in foreign countries with the permission of the ministry to which it is affiliated.
Accordingly, the General Directorate announced on its website that it will be involved in several projects, all of which will be carried out overseas.
The Amending Code states that the provisions of the Zoning Code 3194/1985 concerning scientific responsibility and the Building Superintendence Code 4708/2001 will not be applied to buildings constructed on nuclear power plant sites. The supervision of these buildings will be conducted by building superintendence entities authorised by the Turkish Atomic Energy Institute. These entities will oversee services as per a contract to be signed between the entities and licence holders. However, the fact that building superintendence activities are to be carried out by such entities does not relieve licence holders of their exclusive and strict liabilities.
Matters relating to contracts to be entered into between building superintendence entities and licence holders, supervision activities and the authorisation of building superintendence entities will be set out in a regulation to be enacted within a year from the Amending Code's entry into force.
Natural gas storage
Under the Amending Code, entities that wish to obtain an import licence must guarantee that they have the storage facilities required to store the quantity of natural gas that the Energy Market Regulation Authority (EMRA) specifies. Storage facilities must be located underground and storage obligations will be established by EMRA. The code's preamble stipulates that this change will increase natural gas storage in Turkey in order to cover daily natural gas consumption. The primary reason behind the change is to ensure the security of supply in the natural gas sector.
Number of distribution licences
The Amending Code authorises EMRA to expand and re-designate the distribution zones of distribution companies without a tender process, provided that:
- a distribution zone does not go beyond the borders of the relevant province; and
- the relevant technical requirements and number of consumers are considered.
Where a distribution company operates in a province not included in its distribution zone and makes no request to expand its distribution zone into that province, EMRA may conduct a tender process for the relevant distribution licence if appropriate.
If multiple companies request to expand their distribution zones into the same province, EMRA will give priority to the company with the most consumers in its overall distribution zone. EMRA may divide a province into multiple distribution zones by taking population into consideration. Natural gas distribution companies are authorised to operate in the distribution zones designated in their licences and are required to operate in all zoned lands included under their licence.
Under the Amending Code, the Ministry of Energy and Natural Resources will outline the requirements for entities that use renewable energy source sites, which will be chosen as per Article 4 of the Code Concerning Usage of Renewables for Energy Generation 5346/2005. The requirements are expected to concern:
- decisions regarding grid connections to be granted by the Turkish Electricity Transmission Corporation;
- the running of tenders;
- the allocation of renewable energy source sites;
- guarantees to be sought from entities using renewable energy sources;
- guarantees regarding income when the corresponding obligations are not fulfilled;
- power generation in Turkey; and
- the use of local products.
The Amending Code prohibits zoning plans which may have a detrimental effect on the use and effectiveness of renewable energy source sites, regardless of whether they are located on state or private property, as per Article 4 of the Code Concerning Usage of Renewables for Energy Generation. Further, if a private property has been designated as a renewable energy source site, it may be expropriated as per the urgent expropriation procedure set out in Article 27 of the Expropriation Code 2942.
The Amending Code has introduced a new deadline for the submission of documents regarding nuclear power plant permits that were previously required to be submitted at pre-licence stage. Building certificates and permits, approvals, licence certificates and similar documents required for the construction of new nuclear power plants – and documents proving that the relevant rights have been obtained – are to be submitted to EMRA after a generation licence has been granted in the time period prescribed by the Energy Market Regulatory Board. If a licence holder fails to submit the documents within the prescribed time period, its generation licence will be terminated, unless such a failure is caused by force majeure or is due to valid reasons not attributable to the licence holder.
The Amending Code introduces a new procedure for the privatisation of assets belonging to the Electricity Generation Corporation or its affiliates for the construction of power plants that use renewables or natural resources. When a request is made for the privatisation of these assets as per Article 18 of the Electricity Market Law (as amended), a valuation of the assets to be privatised will not be conducted. Further, privatisations will be made as per negotiation procedure and thus no tender process will be conducted.
The Amending Code adds a provisional Article 8 to the Electricity Market Code. The article grants an exemption period ending on December 31 2019 (regarding investments required to comply with environmental legislation and obtain the required permits as per the environmental legislation) to:
- the Electricity Generation Corporation or its affiliates, subsidiaries, businesses or business units;
- public generation corporations to be incorporated as per the Privatisation Code 4046;
- generation plants owned by public generation facilities;
- facilities and generation corporations privatised before the provisional article enters into force; and
- facilities and generation corporations to be privatised after the provisional article enters into force.
Until December 31 2019 the generation operations of these businesses and entities cannot be interrupted and they cannot be fined. The provisional article also sets out that the Energy and Natural Resources Ministry will issue a regulation regarding the investment required to comply with environmental legislation and the procurement of required permits under such legislation.
Under the Amending Regulation, the renewable energy source support mechanism (YEKDEM) has been changed so that entities or parties participating in the YEKDEM mechanism are now allowed to make bilateral agreements with other entities and sell their energy capacities to them. As a result, renewable energy-based power producers can now make more lucrative agreements to increase the income generated by power-producing activities.
For further information on this topic please contact Ömer Kesikli or Rustu Mert Kaskaat Kesikli Law Firm by telephone (+90 216 348 29 24) or email (firstname.lastname@example.org or email@example.com). The Kesikli Law Firm website can be accessed at www.kesikli.com.
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