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Legal Alerts

18/12/2020

Changes in the Mining, Electricity Market and Natural Gas Market Legislation

Legal Alerts
EMI
General

The Law No. 7257 Amending the Electricity Market Law and Certain Other Laws (“Law No. 7257“) was published in the Official Gazette on 2 December 2020 and became effective on the same date. The Law No. 7257 introduced significant legislative changes for the mining, electricity and natural gas sectors.
Please click on the relevant link below for our sector specific note regarding the Law No. 7257:

Amendments to the Mining Law
Amendments to the Electricity Market
Amendments to the Natural Gas Market

Amendments to the Mining Law

New Developments

The Law No. 7257 Amending the Electricity Market Law and Certain Other Laws (“Law No. 7257“) was published in the Official Gazette on 2 December 2020 and became effective on the same date. The Law No. 7257 introduced significant changes to the Mining Law No. 3213 (“Mining Law“).

What Changes Does the Law No. 7257 Introduce?

Default in License Fee Payments: The Law No. 7257 repealed the rule imposing a fine of twice the license fee amount if a license holder defaults in its license fee payments. The unpaid license fees will instead be subject to default interest per the Public Receivables Collection Law No. 6183 (“Public Receivables Law“).

Exception for Imprisonment: Previously, unauthorized mining activities were subject to imprisonment, except for the expansions to neighbouring sites. Pursuant to the Law No. 7257, the exception will now be applied only for expansions to sites outside of the operation permit area by up to 20 meters.

Time Extension Application: Previously, the application deadline for time extension requests was six months prior to the license expiration date. The Law No. 7257 changed this deadline to 12 months prior to the license expiration date. In addition, a monetary sanction of TRY 100,000 will be imposed on applications submitted past the deadline. There is no change to the rule rejecting the time extension request and cancellation of the relevant license if time extension application is not completed six months prior to the license expiration date.

Royalty Agreements: The Law No. 7257 clearly provided that permits received under the Mining Law for licenses that were partially transferred and registered based on royalty agreements executed with public institutions will continue to be valid for those partially transferred and registered licenses, provided that the capacity undertaking stated in the relevant royalty agreement is complied with.

Financial Clearance Certificate: The submission of a financial clearance certificate issued under the Public Receivables Law is no longer required for mining license applications other than those for the issuance, extension, transfer and succession of mining exploration and operation licenses and environmental compliance fee repayments.

Conclusion

The amendments’ purpose is to re-regulate and simplify the bureaucratic procedures for sector participants.

Amendments to the Electricity Market

New Developments

The Law No. 7257 Amending the Electricity Market Law and Certain Other Laws (“Law No. 7257“) was published in the Official Gazette on 2 December 2020 and became effective on the same date. The Law No. 7257 introduced significant changes to the electricity market through amendments made to the Electricity Market Law No. 6446 (“Electricity Market Law“) and the renewable energy resources support mechanism.

What Changes Does the Law No. 7257 Introduce?

Please refer to our client alert dated 4 December 2020 for in-depth updates to the renewable energy resources support mechanism. The important changes to the Electricity Market Law are as follows.

Generation License Holders’ Share Transfer: The prior approval of the Energy Market Regulatory Authority (“EMRA“) will no longer be required for the share transfers of generation license holders that result in the company’s control change or transfer of shares equal to or more than (i) 5% of the share capital for publicly traded companies and (ii) 10% of the share capital for other companies.

License/Preliminary License Cancellation: Generation licences, auto production licenses, and relevant preliminary licenses that have been issued and relevant license applications that have been made as of 2 December 2020 can be terminated or their relevant installed capacity requirements can be decreased through a partial or full return of collaterals after submitting an application within two months after 2 December 2020.

Installed Capacity for License Exempt Facilities: Renewable energy based electricity generation facilities can be established based on the installed capacity stated in the relevant connection agreement without being subject to any additional installed capacity limitation.

National Tariff Implementation: The price equalization and cross subsidy regime will continue to be applied until 31 December 2025.

General Lighting: The budget allocations from the Ministry of Energy and Natural Resources and general budget tax revenues of relevant municipalities and provincial private directorates will continue to pay for general lighting costs until 31 December 2025.

Connection System Investments: The Law No. 7257 shortened the repayment period for transmission system investments financed by license holders to five years from ten years. In addition, it explicitly stated that repayments will be made through set-offs from the system usage fees.

Immovable: Previously, nationalization requests for license or preliminary license holders were subject to the EMRA’s initial decision. Other requirements for nationalization were the responsibility of the Ministry of Treasury and Finance for preliminary license or generation license holders and TEDAŞ (the national distribution company) for the distribution license holders. The Law No. 7257 re-regulated and simplified the relevant principles and procedures. Accordingly, EMRA became the only authority overseeing immovable requirements for generation activities and TEDAŞ became the only authority overseeing immovable requirements for distribution activities.

Conclusion

The amendments’ purpose is to rationalize procedures and promote sustainability in the market.

Amendments to the Natural Gas Market

New Developments

The Law No. 7257 Amending the Electricity Market Law and Certain Other Laws (“Law No. 7257“) was published in the Official Gazette on 2 December 2020 and became effective on the same date. The Law No. 7257 introduced significant changes to the natural gas market through amendments made to the Natural Gas Market Law No. 4646 and Public Tender Law No. 4734 (“Public Tender Law“).

What Changes Does the Law No. 7257 Introduce?

Organized Natural Gas Wholesale Market: The Law No. 7257 introduced a last resort mechanism to ensure supply security for eligible consumers. The principles and procedures regarding the implementation of this new mechanism will be regulated under a secondary legislation to be issued by the Energy Market Regulatory Authority (“EMRA“). In addition, the EMRA is authorized to incentivize or require trade natural gas in organized wholesale market in order to develop an approach similar to market maker structures in international markets.

Local natural gas: The definition of “production” was expanded to include the transportation of local natural gas directly to the distribution network in order to increase feasibility.

LNG Transportation: LNG under export licenses can be transported in order to facilitate LNG sales.

Distribution Network: Investments of the distribution companies are incentivized in order to expand the distribution network.

(i) Distribution companies can make network investments where there is no zoning plan or roads in accordance with the zoning legislation, provided that:

  • a building with a building registration certificate issued in accordance with the Zoning Law No. 3194 exists in the relevant area; and
  • the distribution company undertakes to displace the relevant network investment at its own cost in case the relevant municipality requires displacement within 10 years following the construction.

(ii) In case municipalities request an investment from a distribution company, no security, inspection service fee, paving fee, ground/area destruction fee, excavation fee or similar fees will be collected from the distribution company for the requested investment. In addition, the municipalities will complete the cover coat of the excavation site free of charge.

Exemptions from the Public Tender Law: The exemption provided for spot LNG purchases of the national network operator (BOTAŞ) through import licenses was extended to cover any kind of natural gas purchases by BOTAŞ. In addition, the exemption for certain offshore activities of the national petroleum company (TPAO) was extended to cover (i) the purchases of BOTAŞ and their affiliates, including those established in abroad; and (ii) offshore and onshore exploration, drilling, production, transportation, storage and gasification activities.

Conclusion

The amendments’ purpose is to provide feasibility in natural gas market transactions and expand the natural gas distribution network.