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Turkiye Introduces Significant Amendments to Energy Legislation and to the Law on Organized Industrial Zone

Turkiye Introduces Significant Amendments to Energy Legislation and to the Law on Organized Industrial Zone

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Law No. 7451 on the Amendment of the Law on Organized Industrial Zones and Certain Laws (“Law No. 7451“), published in the Official Gazette dated 10 April 2023 and numbered 32159, introduced significant amendments to energy legislation, and the Law on Organized Industrial Zones and entered into force on the same date.

What does the Law No. 7451 introduce?

Law No. 7451 introduces significant amendments to the Organized Industrial Zones Law No. 4562, as well as Mining Law No. 3213, Electricity Market Law No. 6446, Natural Gas Market Law No. 4646 and the Utilization of Renewable Energy Resources for Electricity Generation Law No. 5346. The main amendments are as follows:

1. Amendment to the Mining Law

License-exempt electricity generation facilities based on renewable energy resources, determined to be within the scope of Article 14 of the Electricity Market Law to meet the electricity consumption required within the scope of mining activities, were included within the scope of the definition of infrastructure facility. Accordingly, mining license holders will be able to establish license-exempt energy generation facilities based on renewable energy sources within their mining sites.

2. Amendments to the Natural Gas Market Law

Law No. 7451 introduced significant regulations regarding the liberalization of the natural gas market in Türkiye. In this context:

  • The activities of BOTAŞ will be unbundled. Through unbundling, the aim is to ensure that natural gas supply and infrastructure activities are carried out by different legal entities to be incorporated. Principles regarding the companies to be established for this purpose, the matters regarding the transfer and similar transactions to be carried out within this scope will be regulated by a presidential decision. The vertically integrated legal entity of BOTAŞ will continue until the activities carried out by BOTAŞ are separated and restructured as a horizontally integrated legal entity.
    With the permission of the Ministry of Energy and Natural Resources (“Ministry“), the transfer of quantities subject to BOTAŞ’s natural gas purchase contracts or the transfer of contracts can be made. BOTAŞ will not be subject to the market share limitations stipulated under Natural Gas Market Law until the contract transfer processes are completed, and BOTAŞ’s Treasury guaranteed obligations are reserved.
  • The Energy Market Regulatory Authority (“EMRA”) has been authorized to determine procedures and principles for export transmission tariffs, provided that the opinion of the Ministry is received, thereby ensuring that the transmission tariffs are not subject to the restrictions of the domestic transmission tariffs.
  • Financial guarantees to be taken from legal entities engaged in import or export activities within the framework of the security of supply and issues related to ensuring competition will be regulated by EMRA with the opinion of the Ministry.

3. Amendment to Law on the Utilization of Renewable Energy Resources for Electricity Generation

  • Pumped storage hydroelectric power plants will benefit from the Renewable Energy Support Mechanism (“YEKDEM”) and domestic contribution price support, regardless of the reservoir area.

4. Amendments to Electricity Market Law

  • Along with YEKDEM, domestic contribution price support will also be applied to electricity storage facilities established in integration with wind and/or solar power generation facilities.
    Law No. 7451 clarified that the termination and cancellation of charging network operator licenses will be determined by EMRA.
  • The sanctions for real and legal persons regarding entering the market, obtaining a license, having direct or indirect shares in legal entities applying for a license, and taking part in the boards of directors, which are regulated under Electricity Market Law and applicable to legal entities whose licenses are cancelled for three years, will similarly apply to legal entities whose charging network operation licenses are cancelled.

5. Amendments to Organized Industrial Zones Law

  • Organized Industrial Zones (“OIZ“), certified by the Turkish Standards Institute within the framework of the environmental, economic, social and administrative criteria determined by the Ministry of Science, Industry and Technology, within which resource and energy efficiency, lean production, industrial waste cooperation and environmentally friendly practices stand out, are defined as “Green OIZ”.
  • In this context, projects prepared to meet Green OIZ criteria will be evaluated primarily by the Ministry of Science, Industry and Technology when the use of loans is required for the activities of OIZs to facilitate the fulfillment of the Green OIZ criteria.
  • Within the areas designated as industrial areas in the current zoning plans, OIZ areas will be finalized without the OIZ site selection process if the opinion of the administration that approves the zoning plans is provided, and the geological and geotechnical surveys based on the zoning plans are carried out.
  • Before Law No. 7451 entered into force, pursuant to paragraph 4 of the Article 4 of the OIZ Law, lands with private ownership could be acquired through expropriation or purchases in the process of OIZ site selection. With the amendment, owners of the parcels who undertake to make investments within the conditions and periods specified in the regulation will be given space by the OIZ in the selected area without expropriation. However, the properties of those who do not fulfill their commitments will be expropriated.
  • With Law No. 7451, lower limit of the size of the common areas within the OIZ is reduced from 8% to 5%, and the maximum size of the service and support areas is increased from 10% to 15%.
  • In order to prevent the delay of OIZ investments, in the areas where the borders are finalized as OIZ by Ministry of Science, Industry and Technology, OIZ management will be able to commence infrastructure construction and allocate and provide the licenses and permits for the investments following the deposit of the property value appraised by the court to the bank account based on the decision of expropriation and the issuance of the decision of urgent expropriation.
    OIZ legal entity will be able to build superstructures on the parcels located in the industrial or service support areas; and will be able to lease the parcels with superstructures or sell them with superstructure to investors who undertake and commit to commence production.
  • Within the framework of the procedures and principles to be determined by a regulation to be published, participants in the OIZ will be able to lease their facilities to one or more tenants for production purposes.

Conclusion

With Law No. 7451:

  • Regulations encouraging the use of renewable energy were introduced within the significant amendments made in the energy legislation. In this context, those engaged in mining activities will be able to establish license-exempt electricity generation facilities based on renewable energy resources to meet their electricity consumption needs. Furthermore, pumped storage hydroelectric power plants will benefit from YEKDEM and domestic contribution price support.
  • The aim is to create a competitive natural gas market. Within this framework, natural gas imports will be liberalized for both BOTAŞ and private sector legal entities, and the general principles regarding the transition period have been determined.
  • The concept of Green OIZs are introduced to the legislation, and pave the way for OIZ investors to complete their investments faster and more effectively. It is expected that Green OIZs, which are of great importance for a sustainable future, will provide significant opportunities for investments and will support production and export activities with high added value. Further, the green transformation of the country is expected to accelerate with the increase in the number of Green OIZs.

By Nigar Gokmen, Senior Associate, Tugay Hanegelioglu, Berk Bengi and Bertan Baskaya Associates, Esin Attorney Partnership

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