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Energy Privatizations As a Part of Energy Market Liberalization

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Apart from the legal reforms and establishment of an energy exchange, privatizations are one of the energy market liberalization stages. Due to the reforms in electricity, oil and gas markets since 2001, Turkish energy market has been in a restructuring and development period.

Electricity market

The restructuring of the electricity market has been started with the demerger of TEK into TEAŞ and TEDAŞ in 1993. The electricity manufacturing, transmission, distribution and trade activities have been separated and the local power distribution companies have been privatized to a large extent in form of block sale according to the Privatization Law No. 4046 since 2001. After the Electricity Market Law No. 4628 has entered into force in 2001, the Higher Plannig Council has published the Electricity Market Privatization Strategy Report in 2004 which intends to start the privatizations in electricity market within electricity distribution on the purpose of giving confidence to investors for the new manufacturing investments. Within the frame of privatization of power manufacturing assets, privatization of several small and large - scale power plants have been finalized and at present, several power plants' privatization processes are ongoing. As of 2012, distribution and retail sale activities have been separated and most activities except transmission have been allowed to private companies according to the New Electricity Market Law dated 2013. Within this law, the privatization of EÜAŞ and TEDAŞ have also been regulated. However, the power transmission is still a state-owned monopoly.

Pursuant to the IX. Development Plan of State Planning Organization, the main philosophy and target of privatizations in the electricity market is to provide and to increase the security and quality of energy supply, to increase the role of private companies in investments and reformations in the energy market and to establish a competitive market. Accordingly, a revenue-oriented privatization policy has not been implemented.

Natural gas market

The market share of private companies has been extended in most of market activities year by year and privatizations in local distribution have been finalized to a large extent. Currently, the Draft of the New Natural Gas Market is topical in Turkish natural gas market. In the event that this law enters into force, the market share of BOTAŞ will be minimized through its unbundling and these unbundling processes shall be conducted by the Privatization Administration. After entering of the New Natural Gas Market Law into force, the privatization processes of İGDAŞ will come to the fore. Several potential investors in private sector have already declared that they were interested in this transaction.

Control of privatizations in terms of the competition law

In terms of the privatization processes, it is important that the privatization shall not influence the competition in the related market in a negative way. As is known, acquisition of a legal entity in a way that this acquisition creates a dominant position for purchaser which influences the competition in the related market negatively is not allowed according to the Law on the Protection of Competition with No. 4054. Therefore, the privatizations in form of acquisition are subject to analysis of the Competition Authority regarding the competitive risks before and after their fulfilment. Moreover, privatizations in electricity and natural gas markets have also been analysed by the Competition Authority with regard to competition risks arising from the implementation of several market activities in one institution.

It is certain that public authorities' control in energy market has not been completely abolished despite the privatizations. In contrary to that, public authorities have obtained the position of energy market regulator. In this regard, the restructuring of public authorities have also been required. Moreover, as intended by laws and regulations, the increase and encouragement of private sector investments in energy market play an important role and a control mechanism which is to be established by the state will be required before, during and after these transactions. However, on the way of Turkish Energy Market's liberalization, the privatizations contribute to new investment opportunities for private sector companies and to increase the number of market players.

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