Global Dusıncss Rcport proliferation of build-operate-transfer (BoT) financing models. Later, BoT investments fell out of favor; the burden they placed on the public sector was too heavy to be sustainable. These models were ali but completely abandoned ten years ago." in their place, the state began targeting its most inefficiently operating and cash-hungry assets for privatization. Foremost among these projects was the country's electricity distribution network. Divided into 21 separate distribution regions, Turkey's electricity distribution networks were fully privatized at of the enci of 2013. Concurrently, the state also began to undertake the privatization of its assets in generation. Focusing, logically, on its portfolio of natura! gas-fired power plants and small-scale hydropower projects instead of its more profitable large-scale hydroelectric power plants, the Privatization Administration commenced privatization of its assets in power generation in 2008. A decade on, the benefits of this policy are clear. Collectively through the sale of both its assets in distribution and generation the state was able to realize proceeds of over $20 Billion. Liberalization also allowed for generation to rise significantly. Ahmet Aksu, president of the Republic of Turkey's Privatization Administration said: "Previously, there was a market where the state was the only actor. in 2001, the capacity of electricity generation in Turkey was 28,000 mW; however, today it is around 70,000 mW. This alone proves that the model undertaken in Turkey has been successful." Considerable successes indeed, yet to assume that these developments have meant that the state no longer plays a considerable role in the development of the cou ntry's energysectorwould be incorrect. Ankara remains the energy market's chief director and largest stumbling block. This is observed in the two vestiges of the old regime that remain within Turkey's energy sector, the most obvious of which is found in the continued presence of the state in generation, transmission, and the country's natural gas market. Through State Hydraulic Works, the Turkish Government continues to operate 53 of Turkey's 135 installed hydroelectric power plants, accounting for 10,215 mW of the country's total generation capacity. More critically, however, the government continues to also control BOTAŞ, the organization that holds a monopoly control over Turkey's natural gas TURKEY POWER 2015 I PRE-RELEASE market. With over 50% of the Turkish market depending on natural gas-fired power plants for electricity, the success of the Turkish government in transforming its energy market cannot be assessed without understanding the implications that the state's control over the natura! gas market has had on the development of the cou ntry's energy matrix. Eser Ozdil, secretary general of PETFORM, an organization involved in petitioning the government with private sector concerns for those involved in the exploration, production, processing, storage and transmission of crude oil and natural gas, explained the implications of that this has held: "Owing to its vertically-integrated nature, BOTAŞ holds control over 80% of the wholesale market. This is in addition to its position within gas importation - it controls 75% of total imports - and transmission, for which it acts as the country's sole operator. 'The problem that this structure creates is most evident in the case of those that must compete against BOTAŞ in importing natural gas. These companies must sign an agreement with BOTAŞ to transmit their gas as BOTAŞ controls the country's pipeline network - yet they must also compete with BOTAŞ. This is already an uneven playing field as BOTAŞ also subsidizes gas prices in the domestic market. 'Those operating pipelines should function independently. Ali data related to the trade of energy and natura! gas should also be made publically available. Otherwise private sector involvement is purely speculative. But in Turkey, unfortunately, our transmission system operators are not independent. We cannot even have a benchmark price for energy and natura( gas because the price which BOTAŞ chooses to set, by default, becomes the benchmark price. For Turkey's energy market to mature, the privatization of BOTAŞ is sine qua non." Önder Karaduman, chairman of the board at Turkey's Electricity Producers Association (EÜD). confirmed: "it is impossible to discuss the state of Turkey's energy market and claim that it is healthy when natura! gas prices are not subject to market forces and not the product of market competition. BOTAŞ must be disassembled." üne of the most tangible ramifications of Ankara's continued control of the country's gas market is exhibited in the country's inability to translate the changes that have occurred Republic ofTurkey's Privatization Administration Önder Karaduman, chairman ofthe board, Turkey Electricity Producers Association {EÜD) in the global market for hydrocarbons since oil and natura! gas prices begin to fail last year into lower prices for natural gas within the domestic market. Sinan Ak, general manager of Zorlu Energy, one of Turkey's largest generators and a subsidiary of Zorlu Group which is investing $8 billion into the establishment ofa natural gas pipeline from lsrael, explained: "As of yet, we have seen little impact between the global pricing situation for oil and gas and the Turkish market, though we expect that this will soon change. Decreases in natural gas prices in many other regions will enable the Turkish government to better negotiate gas contracts with surrounding countries in the near future, especially with lsrael, lraq and Azerbaijan, which seek to expand natura( gas usage in Turkey. in tandem with this, we will also see volumes of gas imported into Turkey increase. This event, though, will only occur pending changes to the regulatory framework of Turkey's energy sector." Within a better connected energy market, this would have already occurred. However, the continued presence of the state in the energy market has deterred these investGlob�I Business Reports 1 o
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