Turkey's amended electricity law to usher in crucial changes
The Turkish electricity market is expected to undergo important changes from next year after much-anticipated amendments to the Electricity Law reached parliament.
The amendments were submitted to the Turkish Energy Commission on Tuesday. They include the prospective ownership of the proposed energy exchange EPIAŞ, incentives for newly commissioned plants, and the future of transitional contracts held by the electricity incumbent EÜAŞ.
Under the plan, EPIAŞ could be majority-owned by Borsa Istanbul, a newly created bourse, which will subsume the Istanbul Stock Exchange, the Istanbul Gold Exchange and the TurkDEX, the Turkish Derivatives Exchange.
Once these outfits merge, they will be privatised and establish themselves as a complex exchange. Importantly, the proposals stipulate that state ownership in EPIAŞ will be limited to 15% and the share could be split between the electricity grid operator TEIAŞ and the state-owned wholesaler TETAŞ.
Other shareholders may include the Germany-based EEX or the US-owned Nasdaq, Turkish financial and energy companies and possibly ETD, the Turkish Energy Traders' Association, through a specially formed vehicle.
Another crucial amendment relates to the extension of so-called transitional contracts whereby the incumbent EÜAŞ sells the bulk of its production to TETAŞ and distribution companies.
It was hoped these contracts would be discontinued at the end of 2012. However, under the latest proposals they could be extended until 2015, but the text of the law remains unclear on this issue, according to sources who consulted on the recommendations.
ICIS understands there were three points mooted. Under a first proposal the contracts would be extended without any changes to the current set-up.
Under a second recommendation, the bulk of utility EÜAŞ' energy would be transferred to wholesaler TETAŞ, which would become the owner of energy, while EÜAŞ would get an increased role as a participant on the Day-ahead market.
Finally, TETAŞ could receive a large chunk of EÜAŞ' energy, while the latter would be able to retain the assets producing the generation sold under regulated tariffs.
The amended law also proposes to extend the incentives period for newly commissioned plants from 2012 until 2015.
The incentives, which relate to tax breaks and cost reduction for connection to the grid, will remain unchanged. The only element that changes is the period covering these incentives. Under the latest proposals, generators would be given the option to buy energy bilaterally in case they were to experience emergency situations and could not cover their positions. this mean that generators would become active on the wholesale market. ETD chairman Mustafa Karahan welcomed the amendments. However, he argued that the amendments fail to grant stamp duty exemptions to over-the-counter (OTC)transactions that would not be carried out on the EPIAŞ exchange.
Under the proposals, EPIAŞ would be able to operate an OTC screen and any transactions concluded on OTC or exchange platforms under the umbrella of EPIAŞ would be exempt from the 0.872% tax levied on concluded deals.
"It is not right [that transactions concluded outside EPIAŞ] continue to pay the stamp duty," Karahan said. "We shall do whatever we can to fight this.
"We shall also ask for a clarification regarding who exactly will be operating financial products on the exchange. Currently it is suggested that the Day-ahead market will be operated by EPIAŞ, while financial products will be operated by another financial outfit," he added.
Karahan said the amendments would be debated by the Energy Commission before they are rubber-stamped by the parliamentary Grand Assembly, possibly by mid-January. AS
Other Related Stories