- Electricity market is projected to operate in a healthy balance in terms of determination of reference prices by establishment of new stock exchange. Apart of electricity production, electricity trading will be a prominent part of foreign investments.
- Renewable energy resources are available for utilizing with new legal infrastructure and eased fundraising opportunities.
- Strategic and regional incentives are available for energy investments with many support instruments such as VAT exemption, corporate tax reduction and land allocation.
- Pipeline transportation projects may attract foreign investors under large scale investment incentives scheme.
Potential Opportunities in Shale Gas in Turkey: New Appetite for Private Equity Investors
Shale gas has been approved as an alternative energy resources by many countries. In particular, shale gas revolution has already changed US energy policies in terms of manufacturing and pricing. According to Energy Information Agency (EIA) projection, 46% of total natural gas demand will be met from shale gas by 2035.
Another estimation of EIA delivered very remarkable results regarding Dadas Shale field and Hamitabat shale field where 6 billion cubic meters of shale gas that may meet ten years of Turkey’s natural gas demand in view of many researchers. In connection with latest researches, Royal Dutch Shell plc built a partnership with state owned TPAO (Turkish Petroleum Corporation) for generating hydraulic fracturing operations in Turkey. In accordance with this agreement, Shell drilled first well in Diyarbakır in October 2013. Moreover, international medium size companies embarked on shale gas investments by local partnerships and application of new exploration licences. The latest penetration to Turkish shale gas market has been substantiated by San Leon Energy which is a Dublin based by 75 share purchase of Alpay Energy.
In parallel with shale gas potential in Turkey, it is highly expected that Private Equity funds will be intensively acted in shale gas sector for the purpose of being first market players regarding shale gas infrastructure expansion in Turkey.
Steady Demand in Energy
As an emerging economy, Turkish energy market has been performing a growing stage in electricity and gas markets. In line with the stable economic growth, Turkish electricity demand has been consistently growing by average 3% annually in last decade. In parallel with electricity market, natural gas consumption has been escalating by 4.7 %. As a consequence, foreign investors will endeavour to benefit from this growing market.
Hottest Energy Regulation: Investors keep an eye on wind farms
Longstanding government objectives in renewable energy markets instigated venture capitals and private equities in Turkey. In compliance with new by-law which takes place in the scope of New Electricity Market Law Code 6446 Unlicensed electricity production capacity by renewable energy resources has been increased from 500KW to 1 MW. Ministerial Cabinet will enable to expand up to 2.5 MW regardless of any amendments in law. In the light of this regulation, market share of wind power production is likely double up regarding cost benefits. Recent analysis indicated that 30% cost reduction is estimated on wind power projects owing to new regulation. Rising internal rate of return on wind power projects in all likelihood will spark off eased lending policies in Turkey is mostly lead by EBRD (European Bank of Reconstruction and Development) and local banks.
Solar Power Plants Emerges over the Turkish Energy Market
Updated law on non-licensing electricity production will also drive solar PV (photovoltaic) projects in Turkey. New legislation will enable to produce up to 1MW energy and plugged into national grid. Afterwards, government’s feed in tariff (FIT) is available with US$ 0.133 per kilowatt hour that may mount up to US$ 0.20 per kilowatt hour providing local equipment is used for construction of PV panels.
All in all, Turkey’s desire on becoming significant energy market player has been proved by revolution of local market regulations and dimension of bilateral energy agreements in recent years. By extension, foreign investment funds will reach to divergent opportunities in terms of their size, target and strategies.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.