In recent years renewable energy market development became primary energy strategy of Turkish government with the intention of improving energy efficiency and decreasing energy import dependency. Particularly, solar power seems as fundamental resource of electricity generation in the near future. In terms of insolation Turkey possesses high potential among European countries. However, solar energy efficiency is still very low and solar power generation is expected to be one of the emerging market with new foreign investment opportunities in Turkey. In parallel with these developments Turkish Regulatory Market Authority (“EMRA”)has commenced to grant licenses which requires a long and winding pathway for completion of procedures. License applications will be considered up to 500MW installed capacity which has been announced by EMRA.
Necessary Steps for Licensing
In advance of licensing period, applicants must obtain pre-license which is attainable provided that the requirements can be met below:
- Legal entities which are applicant for electricity generation by use of solar energy shall be incorporated as joint stock company or limited liability company. Besides, all the shares of the company must be registered shares.
- Minimum share capital of the company must exceed 5% of total investment amount which is determined by EMRA with regard to installed capacity
- Articles of association must be comply with EPDK regulations
- During the pre-license period, companies are not allowed to make any amendments on shareholding structure.
- A letter of bank guarantee shall be obtained in the amount of TRY 10,000 for each MW.
- 12 months insolation measurement shall be executed within last 3 years period.
- Environmental Impact Assessment Decision shall be granted within 90 days of pre-license period.
- Proposed site must not be located in Military Forbidden Zones or Security Zones which is determined by Turkish General Staff.
In case a legal entity is given Renewable Energy Resource (“RER”) certificate by EMRA, company is eligible to apply for state-owned land with the object of benefiting remuneration, lease and establish servitude rights. Validity of RER certificate will depend upon generation license period.
In order to apply for generation license, applicants shall meet additional requirements below:
- Share capital shall be augmented from 5% to 20% before license application.
- Additional letter of bank guarantee will be demanded by EMRA. Letter of bank guarantee amount will be based on installed capacity of power plant. Minimum letter of bank guarantee will be 6% of total investment amount.
- Share transfers during the license period is subject to EMRA approval when 10% shares of license holder company is subject of direct or indirect acquisition. Also, if a control change occurs without any change in shareholding structure prior approval of EMRA will be mandatory.
Solar Power Plant Project Financing
Following the solar power generation license applications, several local banks and funds usually are keenly interested in bolstering such projects. Strategically, financial institutions evaluate these projects under small and medium sized enterprises’ (“SMEs”) subsidies. Key indicators seems as annual net revenue and number of the employees which should not exceed 250 people in total. According to TurSeff, one of the Turkish energy fund in Turkey, average cost for solar power projects is 1,300 Euros per kilowatt. Eased financing conditions are highly expected regarding loan maturity and warrants which will attract foreign investors to Turkish solar market in Turkey.