PRE-RELEASE i TURKEY POWER 2015 Far this, Turkish Stream could be a point of inflection, indirectly spurring a reconsideration of the structures that underpin Turkish energy. Though Turkey would only receive transit fees and be unable to re-export Russian gas, the success of a project of Turkish Stream's scale and the continued expansion of domestic energy generation require a mature energy market. The development of technical talent, market transparency, storage facilities and the ability to forecast prices are necessary far Turkish Stream to succeed. And though non-gas investments in Turkish energy have continued to grow, this has been has been at the hands of domestic investors. Significant fareign participation has remained limited to two companies operating in generation today: CEZ Group (Czech Republic) and E.ON (Germany), both of which operate through local partnerships. lf the Turkish government wants to realize the estimated $120 billion that will be required to meet its Centennial Goals far the energy sector in 2023, much of this funding must come from foreign markets. Already domestic investors and financial institutions have G Global Business Reports 1 reached their financial limit. Both functionally and symbolically, the death of BOTAŞ - or at least a reconsideration of its role in Turkey's energy sector - would help enable the private sector to play a role in the maturation of the country's gas industry and, perhaps more importantly, bolster much needed foreign investor confidence about investing in Turkish energy. To be clear, this would be an extremely involved process. BOTAŞ is vertically integrated and plays an important role in the pricing of other utilities, making its debundling, at least immediately, an unrealistic policy goal. Far more feasible would be the introduction of a more transparent system of energy pricing. Earlier this year EPDK, Turkey's energy regulator, finalized the establishment of EPIAS, Turkey's new energy trading platform. This represents an important step in market liberalization far Turkey. However, what will come both in the lead up to and the immediate wake of Turkish Stream could very well determine Turkey's ability to realize its energy ambitions. • Global Busıness Reports Final Thoughts Industry Leaders speak out "Tu.rkey's goals for itsenergy seetor are an extension ofa larger ambition: to stand among the world's ten largest economies by 2023. This will necessitate over $1 trillion in trading volume; almost $500 million in exports; and will require that the energy seetor expand domestic generation by 30,000MW. The ability of Tu.rkey to realize these goals, though, is far more complicated than just expanding generation. Tu.rkey will need to renew a great deal ofits current energy production capacity: many state-owned assets, both for natural gas and coal, are old and inefficient. Privatization of these assets will be very tough considering the condition of these assets and potential availability of fi.nancing. As a whole, Tu.rkey's ability to realize its goals for its energy seetor will depend on fi.nancing. Tu.rkey requires a substantial amount of capital -within energy, but alsa within infrastructure. Investment opportunities will be limited; though lending in Europe will improve, the US Federal Reserve will tighten its monetary policy. Attributable to the fi.nancial climate, Tu.rkey will have very hard time to realize many of its goals for the sector, ifsome ofthesefundamentals do not change over time." - Mustafa Karahan, Deputy Chairman, ETD
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