Business Law Articles
Yamaner & Yamaner Law Office
OBTAINING ELECTRICITY GENERATION LICENSE IN REPUBLIC OF TURKEY
Having been put into force, the new Turkish Electricity Market Code No:6446 dated 14.03.2013 has brought in the concept of “preliminary generation license”1 a concept which did not exist before at previous law. Accordingly, a “preliminary generation license” should be obtained from Electricity Market Regulatory Authority of Turkey (“EMRA”) first, as a condition precedent to obtain the final electricity generation license, to embark on construction of the electricity generation facility.
Implementing secondary legislation of the foregoing Code is “Electricity Market Licensing Regulation”2 which sets out in detail the documents required in preliminary generation license application and the list of the approvals, permits and licenses that should be obtained within the preliminary licensing period to obtain the electricity generation license.
1. DOCUMENTS REQUIRED IN PRELIMINARY GENERATION LICENSE APPLICATION
The Applicant Company that desires to be a electricity market player of Turkey should be incorporated in the form of either a Limited Liability Company or a Joint Stock Company, and if the Applicant Company opts for Joint Stock Company form, except for the companies which have been subscribed to stock exchange pursuant to Turkish Capital Market Board regulations, the shares of the Applicant Company shall be in the name of the owner of the share.
That being said, the ensuing basic documents are required to be submitted during preliminary generation license application3;
1. preliminary generation license application petition, in line with Annex II of the Electricity Market Licensing Regulation,
2. procurement and submission of all the supporting documents, the list of which is set out at Annex I of the Electricity Market Licensing Regulation,
3. Submission of Letter of Guarantee to be obtained from an accredited Bank in the amount to be determined by the Electricity Market Regulatory Board based on each MW of installed capacity. There is a maximum cap for the monetary amount of Letter of Guarantee to be calculated based on the formula adopted by Electricity Market Regulatory Board. In preliminary generation license applications, the amount is calculated as 10K TL for per MW, and as a safe harbor total amount shall not exceed 5 million TL4.
4. Submission of Articles of Association of the Applicant Company and other evincing document purport to indicate that the capital of the Applicant Company has been increased to %1 of the total investment value for nuclear facilities, whereas that figure is %5 of the total investment value for other power plants. In the Articles of Association of the Applicant Company, there should be an additional provision setting forth that the partnership structure of the Applicant Company shall not change during the preliminary license period until after obtaining the electricity generation license, which means under the prevailing law, transfer of the shares of the applicant project company is strictly forbidden during the preliminary license period.
5. Submission of bank receipt purports to indicate that the fee for the preliminary electricity generation license has been deposited to Electricity Market Regulatory Agency (EMRA)’s account.
Once the foregoing documents are submitted and afterwards EMRA deems that there is not any missing documents; EMRA should obtain TEİAS’ (“Turkish Electricity Transmission JSC”) opinion with regard to availability of the transmission lines and eligibility to access to the grid system. Having received TEİAS’s opinion, EMRA approaches to the Applicant Company to check whether the latter is fine with the content of TEIAS’ opinion and ultimately grants the preliminary generation license by virtue of its BoD Resolution.
The duration of preliminary generation license is maximum three years unless an extension is granted under extra ordinary circumstances, which means all the stated requirements should be met within this grace period, otherwise the application will fail and there is a risk of forfeiture of Letter of Guarantee submitted in preliminary generation license application as well as application fee, itself.
2. TASKS TO BE FULLFILLED RIGHT AFTER ISSUANCE OF PRELIMINARY GENERATION LICENSE TO PROCURE THE FINAL ELECTRICITY GENERATION LICENSE FROM EMRA
In nutshell, the following basic licenses and permits5 should be obtained within 24 months of grace period stated above.
1. Approval of zoning plan pursuant to Turkish Zoning Code No:3194 and obtaining ownership or an in rem right of the Site on which the generation facility is to be constructed. In this context, the 1/1000 and 1/5000 scale maps of the project site shall be in line with larger scale of Environmental Order Plans. Besides, If the generation facility is to be constructed on the treasury land, then necessary land permits in the form of “construction right”, a type of in rem right, shall be obtained from Ministry of Finance.
2. Approval of preliminary project approval to embark on construction of the facility from Ministry of Energy of Turkey.
3. A direct application to TEIAS to manifest the intention of the Applicant Company to sign a “Connection to the Grid and System Usage Agreement” with the administration right after issuance of final generation license.
4. Procurement of Environmental Impact Assessment Decision from Ministry of Environment and Urbanization, pursuant to Turkish Environmental Code No: 2872 and Environmental Impact Assessment Regulation6 which is the backbone of all the following licensing process for the power plants. The administrative decision of the Ministry of Environment and Urbanization is subject to court scrutiny once it is challenged by a plaintiff which has standing to file a court claim for stay of execution and ultimately invalidation purposes, therefore a meticulous study shall be conducted and utmost attention must be paid in preparation of the Environmental Impact Assessment Report in line with the laws, guidelines and best practices.
5. Obtaining construction permit from the municipality of the situs of the generation facility or other document in lieu of construction permit or a decision of Ministry of Environment and Urbanization stating that there is no need to obtain the construction permit for the generation facility to be constructed.
6. Submission of Articles of Association of the Applicant Company which should indicate that the capital of the Project Company has been increased to %5 of the total investment value for nuclear facilities, whereas that figure is %20 of the total investment value for other power plants. For clarification purposes, after issuance of preliminary generation license, but before switching to final electricity generation license, based on the source of the generation, there should be a capital injection up to %5 of total investment value for nuclear power plants, and %20 for conventional and renewable power plants.
7. Submission of Letter of Guarantee to be calculated in accordance with Electricity Market Regulatory Board’s Resolution dated 21/11/2013 No 4709-6. When it comes to Letter of Guarantee to be submitted in final generation license application, the actual amount to be calculated will be announced by EMRA Board, but in any event shall not exceed %10 of the total investment value7. Please note that, when making the calculation, the amount of the Letter of Guarantee already submitted in preliminary generation license application shall be deducted from the amount to be submitted in final generation license application.
Upon completion of the referred documents and obtaining sought licenses and permits, the Electricity Market Regulatory Board is expected to grant an electricity generation license for a period of 49 years subject to renewal, and the Applicant Company will be the holder of the license and be ready to embark on construction of the generation facility. It should be noted that, the duration of the construction and completion period of the facility, installed capacity and annual maximum generation of electricity will be incorporated into and indicated at the generation license. Finally, a generation license might be revoked in the occurrence of following events; i) upon request of the license holder, ii) if the license holder goes bankrupt and, iii) failure to keep material conditions and compliance with substantial provisions in the course of generation license period. Material breach and non-compliance and consequently a revocation decision, if deemed necessary, shall be rendered by the EMRA Board on the basis of substantiating and proving documents.
1 Article 3-z of Electricity Market Code No:6446
2 Published on 02.11.2013 at Official Gazette No: 28809
3Updated full list of the documents required in preliminary generation license application was published at Official Gazette of Turkey No: 30431
4 EMRA Board Decision dated 21/11/2013 No: 4709-6
5Likewise, the updated full list of the documents required in final generation license application was also published at Official Gazette of Turkey dated 25.05. 2018 No: 30431.
6 Published at Official Gazette of Turkey dated 25.11.2014 No. 29186
7 Article 20, paragraph 6-b of Electricity Market Licensing Regulation