Turkey, one of the fastest growing energy markets in the world, draws attention through the investments made in the energy sector. Giant companies aspiring to have a share of the cake point out to the energy sector as the most promising sector of the year 2013. Tleads the fastest growing energy markets in the world thanks to a high demand increase coming in parallel with the economic progress, industrialization and urbanization dynamics. While Turkey is expected to continue growing more than global and European averages until 2020, large scale energy investments have to be realized to support this growth. The energy sector is currently transforming into a competitive market thanks to privatization processes, and the market has been recently witnessing rapid growth due to privatizations, licensing tenders and strategic partnerships. Another fact that places Turkey among the favorite markets in the eyes of investors is the 6.3 percent annual increase in the national electric consumption according to data by the Ministry of Energy and Natural Resources. An annual investment volume of $5 billion in the sector is required to avoid a national energy crisis. The giant companies, being well aware of this fact, having decided to abandon some areas, turned towards the energy sector. The aim of these giant companies is to get the largest share of the cake by doubling their capacities in five years. Energy and Natural Resources Minister Taner Yıldız pointed out the ever-growing potential of the sector when he said last year, “I believe that the energy sector will be the one that attracts direct investment most substantially in 2013 among others. Turkey is growing and so does the energy sector.” The Ministry of Energy and Natural Resources projects that the investment need for the next 15 years is $100 billion, but the Energy Market Regulatory Authority anticipates that this figure will be between $225 billion and $280 billion for the same period. HOW TO SUSTAIN GROWTH IN THE SECTOR? Last year’s significant developments in the energy sector indeed pointed out to the future situation of the sector. In his assessment of the year 2012, Akfen Energy General Manager Metin Yıldıran pointed out that Turkey is the sixth largest economy and has the sixth largest electricity market in Europe. “Turkey’s annual energy demand increase is nearly 4.5 percent since 1990, while its energy import dependency is 71.5 percent,” says Metin Yıldıran, demonstrating the high level of annual investment need due to external dependency and the annual demand growth in energy. Noting that growth is not sustainable at all in the highly import-dependent energy sector, Yıldıran says that the solution lies in finding ways to decrease dependency. The year 2012 witnessed a vivid environment in terms of energy sector transactions. Saffet Atıcı, Akfen HEPP Investments & Energy Generation General Manager indicated that too many applications were lodged for natural gas and coal import licenses in 2012, but that some of those applications are expected to be withdrawn due to a new law. Reminding that natural gas power plants were excluded from the scope of investment incentives after the new incentive system came into effect in June 2012, Atıcı says that he believes those who want to enter the sector without a plan will take a step back thanks to the configured regulations. Energy investments took a start in this year. The privatization process of 13 out of 18 privatized electricity companies was completed. The transfer of to the private sector has been completed. With the completion of 5 companies intheprocess of transfer, the total revenue of electricity distribution is expected to be $12.7 billion. DISTRIBUTION IS PASSED OVER TO THE PRIVATE SECTOR The privatization process of electricity distribution was completed with tenders last month. According to the Privatization Administration data, electricity and natural gas distribution grids and thermal power plant privatization tenders totally worth $5.7 billion and the privatization of real estates totally worth 125 million Turkish Liras were realized within the first 2.5 months of this year. When all these are taken into consideration, it seems that electricity distribution services in Turkey are going to be handled by the private sector completely. Steps taken toward achieving privatization targets dramatically affect the mobilization in the market. Making an assessment about the post-tender process, Akfen Energy General Manager Metin Yıldıran indicates that the progress made in this regard is quite bleak. Emphasizing that the installed capacity is significant in regard to natural gas based power generation license applications and existing licenses, Yıldıran says that the realization of a very substantial part of these current or future licenses may come into question. Also touching upon the government’s other moves in energy, Yıldıran says that an incentive mechanism on domestic coal and lignite use carved out by the government provides serious advantages for investors, and he underlines that a significant increase in the use of these resources is expected. Domestic and foreign investors display interest in electricity production as well as the privatizations of distribution grids. The underlying factor is the increasing industrial production. Experts point out to the fact that renewable energy sources such as hydroelectricity, geothermal and wind power will gain importance and the natural gas will also retain its appeal. SOLUTION TO THE NATURAL GAS SUPPLY PROBLEM Turkey will also witness significant progress in terms of energy efficiency and benefiting from renewable energy resources. World Energy Council Turkish National Committee President Yücel Süreyya Özden claims that utilizing domestic and renewable energy resources is highly crucial. President Özden says, “Turkey is 75% foreign dependent in terms of primary energy resources such as natural gas and oil. We need to focus on this problem. The solution to this problem lies in utilizing domestic energy resources such as coal, water, wind and solar power. The ventures to be made especially in solar power will transform the life style of our people.” NUCLEAR POWER WILL SHINE OUT It seems that two nuclear power plants, which are planned to be built in Sinop, a province by the Black Sea, and in Akkuyu, a district in the province of Mersin by the Mediterranean Sea, will suggest a good course of action for the future nuclear power investments in the energy sector. An intergovernmental agreement regarding the construction and operation of a nuclear power plant in Akkuyu area was inked in 2010 between Turkey and Russia. Negotiations on the construction of a second nuclear power plant in Sinop are currently underway. The agreement was signed to build a nuclear power plant in Sinop under the joint venture of Japanese Mitsubishi and French Arevea. It is said that the public will have a share in the nuclear power plant which will be constructed by tha consortium of French and Japan. It will cost to $22 billion and be completed by 2023. It is also anticipated that the construction of the first nuclear power plant will commence in 2014. ITU Institute of Energy USA Nuclear Research President Prof. Dr. Beril Tuğrul pointed out to the progress made by Turkey in the recent years regarding the nuclear power plants. Prof. Dr. Tuğrul said, “However, these power plants cannot be built in a very short period of time and therefore, it will not take less than 7 years to establish a nuclear power plant in Turkey,” emphasizing that nuclear power plants are highly significant for Turkey in reaching the 2023 targets. She explained possible ways of eliminating the possibility of an energy gap, saying, “Turkey requires a high amount of energy production in order to reach 2023 targets and also for later periods. For this reason, all resources must be utilized. For Turkey to reach 2013 targets, more than one nuclear plant has to be established. If the correct strategy is not followed in terms of energy production, Turkey might face an energy gap by the year 2017.” HEPP PROJECT VENTURE In 2013, positive developments are expected in the field of Hydroelectricity Power Plants (HEPP), which is one of the important areas of the energy sector. Among the resources that play a significant role in Turkey’s energy generation, water has the largest share. In decreasing foreign dependency in energy, HEPPs play a crucial role. Although Turkey seems to have used a great portion of its reserves required for HEPPs, the large scale power plants to be established are significant in solving the energy problem. Within this scope, merger of the HEPP investments of the Akfen Holding, one of the significant players in the energy sector which began HEPP investments in 2007, under the title of Akfen HES was an example of the initial developments in this field. The holding’s HEPP companies were gathered under a single roof by March 28, 2013. There are 16 HEPP projects with a combined installed capacity of 366 MW under this roof. One of these projects is built on a dam and all others on rivers. In accordance with the Renewable Energy Law, these plants are under protection against price risk for the first 10 year of production and a purchasing guarantee of $73 per megawatt hour. Out of the HEPP portfolio, 8 plants with a total capacity of 142 MW are in operation and 3 plants with 62 MW of installed power, which are still in construction, are planned to be completed by the end of the year.