Privatization of the Turkish Electricity Distribution Companies
Industries Energy, Utilities & Mining Sector
Privatization of the Turkish Electricity Distribution Companies
Table of Contents 01
02 Executive Summary 03 General Outlook to Privatization 05 The Turkish Electricity Market 14 TEDAfi 17 Privatization of the Electricity Distribution Companies 27 Appendix 1: Electricity sector strategy paper 28 Appendix 2: Cost-Based Pricing Mechanism 29 Appendix 3: Amendment Proposal to the Law no. 4628 30 Abbrevations 31 List of Tables and Exhibits 32 References 33 Contacts
02 Executive Summary
Growing need for energy mainly driven by increasing level of urbanization and industrialization, coupled with the fiscal imperatives of the state urged the governments to take concrete actions to involve the private sector in energy infrastructure projects by the early 1980s. However, the lack of legal and regulatory framework underlying a consistent reform strategy stalled the private sector involvement in the power industry projects. Indeed the subsequent legal disputes resulted in an overall negative impression of the investment climate in Turkey. Based on the lessons learned over the last 25 years, a more structured transformation process is in the making. Indeed the enactment of the Electricity Market Law no. 4628 in 2001 and the establishment of the Energy Market Regulatory Authority (EMRA) stand as vital steps in the right direction, with the basic goal to devise a competitive framework in the market by establishing pricing mechanisms that reflected the actual cost of the service in such a way as to minimize the market-related role of the state-owned entities. In line with the 2004 Strategy Paper depicting the roadmap for the liberalization process in the Turkish Electricity Market, the first round of privatization comprising three distribution companies, namely BASKENT, SEDAS and AYEDAS, was set to have been finalized by March 2007. However, the aforementioned tenders were rendered defunct and delayed for an indefinite
Privatization of the Turkish Electricity Distribution Companies
Table of Contents 01
02 Executive Summary 03 General Outlook to Privatization 05 The Turkish Electricity Market 14 TEDAfi 17 Privatization of the Electricity Distribution Companies 27 Appendix 1: Electricity sector strategy paper 28 Appendix 2: Cost-Based Pricing Mechanism 29 Appendix 3: Amendment Proposal to the Law no. 4628 30 Abbrevations 31 List of Tables and Exhibits 32 References 33 Contacts
02 Executive Summary
Growing need for energy mainly driven by increasing level of urbanization and industrialization, coupled with the fiscal imperatives of the state urged the governments to take concrete actions to involve the private sector in energy infrastructure projects by the early 1980s. However, the lack of legal and regulatory framework underlying a consistent reform strategy stalled the private sector involvement in the power industry projects. Indeed the subsequent legal disputes resulted in an overall negative impression of the investment climate in Turkey. Based on the lessons learned over the last 25 years, a more structured transformation process is in the making. Indeed the enactment of the Electricity Market Law no. 4628 in 2001 and the establishment of the Energy Market Regulatory Authority (EMRA) stand as vital steps in the right direction, with the basic goal to devise a competitive framework in the market by establishing pricing mechanisms that reflected the actual cost of the service in such a way as to minimize the market-related role of the state-owned entities. In line with the 2004 Strategy Paper depicting the roadmap for the liberalization process in the Turkish Electricity Market, the first round of privatization comprising three distribution companies, namely BASKENT, SEDAS and AYEDAS, was set to have been finalized by March 2007. However, the aforementioned tenders were rendered defunct and delayed for an indefinite
References: 1. Güney, Esat Serhat; 'Restructuring, Competition and Regulation in the Turkish Electricity ' TEPAV Publications,December 2005 2. Bebiroglu, Alen; 'The wires are humming ' , Standard Unlu Securities Equity Research / Electricity Sector Report, January 2008 3. ICCI Conference Book, 2008 4. www.teias.gov.tr 5. www.tedas.gov.tr 6. www.epdk.gov.tr 7. www.emo.org.tr 8. www.oib.gov.tr 9. www.ise.gov.tr 10. www.menr.gov.tr 11. www.treasury.gov.tr 12. www.dpt.gov.tr 13. www.oecd.org 14. www.eva.ac.at Contacts 33 How can PricewaterhouseCoopers Turkey help you? PricewaterhouseCoopers is the world leader in audit, tax and advisory services, with extensive experience in the energy sector. PricewaterhouseCoopers Turkey provides versatile advisory services that produce the most appropriate responses for the needs of firms, combining its experience in the local energy sector with far-reaching know-how and experience accumulated in the PricewaterhouseCoopers global network. Faruk Sabuncu PwC Turkey Energy, Utilities & Mining Leader Tel: +90 212 326 6082 Orhan Cem PwC Turkey Advisory Leader Tel: +90 212 326 6054 Murat Çolako¤lu PwC Turkey Tax Partner Tel: +90 212 326 6434 Ediz Günsel PwC Turkey Assurance Partner Tel: +90 212 326 6067 Fulya ‹lbey Advisory Manager - Energy Expert Tel: +90 212 326 6686 PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries work collaboratively using connected thinking to develop fresh perspectives and practical advice. PricewaterhouseCoopers operating in Turkey (www.pwc.com.tr) since 1981, consists of 5 offices; in ‹stanbul (2), Ankara, Bursa and ‹zmir, with 26 partners and nearly 1000 professional staff. The Turkish Energy, Utilities and Mining group is the professional services leader in Turkish energy, utilities and mining community, advising clients through a global network of fully dedicated specialist. © 2008 PricewaterhouseCoopers Turkey. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers Turkey or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. “PricewaterhouseCoopers Turkey” refers to Baflaran Nas Ba¤›ms›z Denetim ve Serbest Muhasebeci Mali Müflavirlik A.fi., Baflaran Nas Yeminli Mali Müflavirlik A.fi. and PricewaterhouseCoopers Dan›flmanl›k Hizmetleri Ltd. fiti. which are separate legal entities incorporated in Turkey within the PricewaterhouseCoopers Turkey organisation.