Turkish economic growth that had been going on for more than a decade have created a strong economy that is based on high demand for energy. The demand has reached to such a high extend that energy sector had turned in to one of the most important sectors that have been contributing to the current account deficit of the country. Approximately USD$ 60 billion of the current account deficit is contributed by the energy sector during the last 12 months. In a country which is heavily dependent on energy imports this is not a surprise.
The Electricity Demand
During the course of the last decade the increase in demand for electricity have reached an annual rate of 7%. Annual worth of electricity consumed by Turkey in 2013 has already reached USD$ 33.5 billion. The continuing economic growth of the Turkish economy lead many of the pundits to expect a similar rate of increase in demand for the next ten years. According to the CEO of one of the biggest players in the Turkish energy sector, when such expectations are translated in to numbers it means that Turkey will need to establish 5.000 megawatts established electricity production capacity on an annual basis and around USD$ 10 billion worth investment.
Especially the liberalizations in the Turkish energy market which had led to a more competitive market increased the number of M&A’s in the sector. 6 different M&A’s have taken place during the year 2013 as the proof of a strengthening market which is at the same time turning more competitive. All these M&A’s were Turkish based but there is an increasing interests on the part of the American and European based private equities regarding especially the renewable energy projects in Turkey.
The liberalization of the energy sector have started in 2001 by the establishment of Energy Market Regulatory Authority (EPDK). Then the privatization of the distribution ensued. Then in 2009 the policy of price determination based on hourly market was adopted y the Turkish authorities. But the most important measure for the liberalization of the energy market will be brought by the establishment of the energy stock exchange EPİAŞ.
The Electricity Market Law had envisaged the establishment of an energy stock exchange EPİAŞ in the second quarter of 2014. The main objective of the energy stock exchange is to integrate itself in to the foreign energy stock exchanges and bring more transparency in to the Turkish energy market especially following its take over from the spot market. The newly established stock exchange will be partly be owned by Istanbul Stock Exchange; Borsa Istanbul. The estimated share of Borsa Istanbul in EPİAŞ is 30%. The rest of EPİAŞ will be divided between the private and the public sectors where the private sector investors will have the ownership of the 40% and Turkish Electricity Transmission Company (TEİAŞ)will have the ownership of the remaining 30%. EPİAŞ is expected to increase the liquidity in the electricity market as well as the efficiency and the transparency.