Important Changes to the Electricity Market Licensing Regulation

On February 24, 2017, the Energy Market Regulatory Authority (“EMRA”) published a Regulation (“Amending Regulation”) containing important changes to the Electricity Market Licensing Regulation (“Licensing Regulation”), including the removal of the share transfer restriction at the pre-license period for transfers to foreign companies and foreign-capital companies, and changes related to the Renewable Energy Resource Areas (“YEKA”). Highlights of major changes are as follows:

• The Amending Regulation introduces several important exceptions in relation to the limitation of pre-license holders’ share transfers. Accordingly, direct or indirect acquisition of the pre-license owners’ shares by a foreign company or a foreign-capital Turkish company through utilization of foreign funds will not be subject to the share transfer limitations set forth under the Licensing Regulation. Additionally, share transfers between direct or indirect shareholders of a pre-license holder, which do not change the control over the shareholder structure of such pre-license holder, will also be exempted from the share transfer limitations.
• Special provisions in relation to YEKA pre-license application and assessment procedures have been incorporated under the Licensing Regulation.
• For the transfer of 10% or more of the shares of a company holding a YEKA generation license, in addition to the EMRA Board approval, the written approval of the Ministry of Energy and Natural Resources (“Ministry”) will also be required for the transfers conducted at the construction period of the power plant.
• Written approval of the Ministry shall also be required, in addition to the EMRA approval, for merger and de-merger of the YEKA generation license holders during the construction stage.
• The Amending Regulation also aims at aligning the provisions of the Licensing Regulation in relation to YEKA with the Regulation on Renewable Energy Resource Areas (“YEKA Regulation”) and with the tender specifications of YEKA projects. Accordingly, term of the pre-licenses to be granted for YEKAs shall be in line with the term stated under the tender specifications, and pre-license applications shall be made within the time periods prescribed under the YEKA Regulation. Furthermore, term of the generation licenses to be granted for YEKAs has been envisages as 30 years.
• The Amending Regulation also sets forth provisions regarding the amendments to YEKA pre-licenses. Accordingly, in the event of failure to perform the obligations on time which stems from the Allocation for Domestic Production and Allocation for Use of Domestic Products in accordance with the YEKA Regulation, the term of the pre-license can be extended up to 36 months with the approval of the EMRA board provided that the justifications and measures submitted before the General Directorate of Renewable Energy Resources are deemed to be adequate. Any time extension exceeding 36 months shall be subject to Ministry’s approval as well. The Amending Regulation also envisages a list of pre-license amendments subject to approval of the EMRA Board.
• Save for the ones with an organized industrial zone license, all power plants with a total installed capacity over 100 MWe will be required to (i) operate their corporate information systems and industrial control systems in line with TS ISO/IEC 27001 Information Security Management System standard, (ii) obtain a certification proving their compliance with TS ISO/IEC 27001 standards from a certification authority which is accredited to Turkish Accreditation Authority and ensure the validity of such certification, and (iii) take ISO/IEC TR 27019 guide documentation as reference in addition to TS ISO/IEC 27002 Implementation Guide for the Information Security Management System to be established in accordance with TS ISO/IEC 27001 within 24 months from the provisional acceptance date. Amending Regulation provides that, generation license holders falling under the scope of this provision shall satisfy the obligations thereunder until 31 December 2017.

The Amending Regulation specifically provides that these amendments will also be applicable for the pre-license and generation license to be granted upon the Karapınar YEKA tender (the first YEKA project in Turkey located in Konya with a total installed capacity of 1000 MWe), of which the tender process was started on October 20, 2016, and the current tender date has been set as March 20, 2017 after a couple of postponements.

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