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Turkish incumbent to free up electricity volumes for market - ministry

06 Jun 2012 17:03:38 | edem

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Over 30% of the generation currently held by Turkish incumbent EÜAŞ could be freed up for the market when its long-term agreements finish at the end of this year, a source at the Ministry of Energy confirmed in an interview with ICIS.

Under existing arrangements, the bulk of hydro generation from the portfolio of EÜAŞ is sold to state-owned wholesale company TETAŞ, which in turn sells the purchased generation to state-owned and private distribution companies. Meanwhile, the generator's thermal generation is sold at regulated tariffs directly to state and private distribution companies.

"EÜAŞ and TETAŞ will be free to decide how they are going to sell their generation," the ministry source told ICIS.

Mustafa Karahan, chairman of the Turkish Energy Traders' Association (ETD), welcomed the news, saying that the proposals to terminate EÜAŞ' contracts would increase liquidity on the market and help the liberalisation process that is underway.

He said that the plans to terminate the long-term agreements were part of proposed amendments to the Turkish electricity and natural gas laws that would have to be considered by the parliament later this year.

"Of course the proposed amendments have to go to Parliament for approval, but overall this is very good news for the market.

"ETD organised a meeting in Ankara on Tuesday and Zafer Demircan, general manager of energy affairs in the Ministry of Energy, confirmed that the contracts may be terminated at the end of the year [subject to an approval from the parliament]."

The generation that is expected to be freed up could be auctioned off as part of annual tenders or sold to the free market.

Liberalisation and liquidity

The Turkish energy sector is undergoing radical structural changes that aim to attract sizeable investments in the long-term.

These changes include the creation of a cross-commodity energy exchange, EPIAŞ, that would be responsible for producing a reference price for the electricity market.

"The news [the termination of the contracts] is very good for EPIAŞ as well because we are expecting increased liquidity," Karahan said.

Other proposed changes include the merger of the electricity wholesale and retail licences. Under planned amendments, companies will see their current operations split into retail and distribution. Furthermore, the retail licence of distribution companies will be merged with licences held by wholesale companies. The merger should, in theory, grant a level playing field for both sides.

Karahan said the planned merger was another step in the right direction, but pointed out that the government should ensure that the harmonisation of the two licences is carried out in a fair manner. AS

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