Legislation keeps growth in renewable energy sustainable*

Although Turkey’s economy has been through its fair share of ups and downs in recent years, the renewable energy sector has seen sustainable growth brought about by key pieces of legislation to regulate and help the sector flourish. 

The government’s comprehensive structural changes to the legal framework governing licenses and resources have paved the way for new ideas and projects from the private sector. These new ideas and projects were not the sole outcome of these changes, but new collaborations, joint ventures and M&A played a part as well.

Joint ventures and M&A are an essential part of the private sector, and Turkey’s renewable energy business has been a target of such transactions presently, since the current legislation does not allow “transfer of licenses” whilst  share transfer of the SPV’s holding licenses is eligible . With the government’s regulation of a new system for the management and allocation of renewable energy resource areas, known as YEKA by its Turkish acronym and which mainly belongs to the government, those essential parts became more active. 

The introductory provision of the regulation sets out the scope and aims of the change, which will speed up the assignment process of government-, Treasury- or privately owned land for procuring resource areas that can be allocated for large renewable energy generation projects. The regulation also implements a new system for the support of research and development of local technology to be used in this sector.

Naturally, with these new regulations in place, momentum has started to increase: Projects have found equity and there has been cooperation in research, and positive results soon followed. 

Both foreign and domestic investments have played active roles in M&A across the board. “Foreign investors focused on active and/or large capacity projects in the WPP (wind power plant) sector, while domestic investors focused on the licenses and projects they possessed,” wrote Reha Pamir, the director of corporate finance for energy, construction and mining at Is Bank, Turkey’s biggest listed bank, in a report.

Renewable energy is an important global economic development indicator, and it has resisted almost every negative economic challenge in Turkey, from political changes to stock-market trends and foreign-exchange rates, to maintain its path of growth. The wide range of projects and opportunities in Turkey have pushed companies and sector players into deals and cooperation, while joint ventures and M&A have breathed even more life into the sector.

It is important to designate the scope and aim of each legislation and regulation, since not everyone is directly responsible for the sustainable activity of any sector. The change to the licensing infrastructure brought comprehensive and resourceful investments and projects to the fore. 

Projects that were researched properly and thoroughly developed rose to the top, and the licensing changes rewarded them. Technical talent joined with financial power, financial parties merged with or acquired strategic investors. Meanwhile, the licensing regulation played a key role in invigorating the renewable energy sector’s M&A landscape. The newly enacted regulation regarding the allocation and designation of resource areas enriched the sector by adding opportunities for strategic alliances will work with the government for the development, allocation and management of the resource areas. Lastly, support for the research, development and production of national technology for the sector played a key role. Naturally, M&A activity increased even more in reaction.

In light of these developments, M&A activity in the renewable energy market has increased and matured to the extent that it has helped the sector stabilize. This means that prosperous and effective projects have reached their completion while lesser ones, such as those with technical complications and insufficient research and development, have either led to their termination or in some cases improvement. 

This push-pull movement has caused a gearing-down effect, which in turn may have led to a decrease in M&A activity, but in the end proved to be a triumph of quality over quantity. 

Moreover, this situation means that proved projects and effective operators will have a suitable operating space for alliances and joint ventures. This is largely due to the new regulation regarding the management and allocation of resource areas. It has played a greater role in the betterment of the sector while helping to mark out the M&A scene both in effectiveness and volume, and directed key players towards specialized partnerships and cooperation, which are better suited for higher-supply and effective projects.      

 Vefa Resat Moral, Managing Partner,

Karaca Kacar, Senior Associate,

*This article has been published in Dunya Executive