1) Why PPAs have become a central tool in the Turkish energy market
A Power Purchase Agreement (PPA) is no longer just a “sale contract” between a generator and a buyer. In Turkey, PPAs increasingly function as the commercial spine of renewable and conventional projects alike—especially as corporate buyers seek predictable energy costs, stronger sustainability credentials, and long-term supply certainty.
Turkey’s electricity market is built to operate under private-law principles within a regulated system designed to ensure a stable, transparent market and reliable electricity supply. (epias.com.tr) That architecture matters because a PPA’s enforceability and bankability are heavily influenced by:
- market rules and settlement mechanics,
- grid connection and dispatch realities,
- licensing restrictions and regulatory approvals, and
- data integrity and certification systems (such as renewable guarantees of origin).
PPAs are therefore “hybrid contracts” in the legal sense: primarily governed by contract law and commercial principles, but often dependent on energy market regulation for performance and payment mechanics.
This guide is written for:
- renewable developers (GES/RES), storage operators, and conventional generators,
- industrial and commercial electricity consumers,
- infrastructure funds and lenders, and
- corporate buyers seeking long-term renewable procurement in Turkey.
It focuses on how to structure a PPA that is enforceable, financeable, and dispute-resistant—and what legal safeguards should be included from the first term sheet.
2) What a PPA means in practice: “physical” energy vs “financial” settlement
Before drafting begins, the parties must choose the model. In Turkey, the most practical distinction is:
A) Physical PPA (delivery-based)
Electricity is physically delivered through the grid to the buyer’s consumption point, usually via:
- a licensed supplier acting as an intermediary (“sleeved PPA”), or
- a structure where the buyer is itself a market participant capable of settlement responsibilities.
Because Turkey’s electricity market is regulated and involves market operators, connection agreements, and settlement, physical PPAs must be aligned with market participation rules and allocation of balancing responsibility. (epias.com.tr)
B) Virtual / synthetic PPA (financial hedge)
The generator sells power into the market, and the buyer and seller settle the difference between a contract price and a reference price (a “contract-for-difference” style structure). This can be attractive where the buyer’s load is in a different region or where direct physical delivery is not operationally convenient.
However, virtual structures require careful legal analysis in Turkey because:
- pricing references and settlement mechanics must be defined precisely,
- tax and accounting treatment can be complex, and
- depending on structure and parties, additional financial-market considerations may arise.
Client-facing takeaway: A PPA is not “one template.” The structure must be selected to fit the parties’ regulatory position and risk appetite.
3) The legal backdrop: electricity market rules shape contract reality
Turkey’s Electricity Market Law defines the market’s scope—generation, transmission, distribution, wholesale/retail sale, import/export, market operation—and frames rights and obligations of market actors. (epias.com.tr)
Why this matters for PPAs:
- The PPA’s “delivery” is ultimately the grid’s delivery.
- The PPA’s “price certainty” depends on how the parties allocate imbalance, curtailment, network charges, and settlement corrections.
- The PPA’s bankability depends on whether the contract respects regulatory constraints and can survive audits, license amendments, and change-of-control events.
Also, renewable PPAs increasingly interface with certificate systems. Turkey’s Renewable Energy Guarantees of Origin System (YEK-G) and the organized YEK-G market are designed to track and certify renewable electricity from producer to consumer, and certificates can be traded independently of energy. (epias.com.tr)
This allows a buyer to claim renewable sourcing with a stronger evidentiary basis—if the contract properly defines certificate issuance, transfer, and retirement.
4) Common PPA structures used in Turkey (and which one fits which client)
4.1 Corporate sleeved PPA (most common in practice)
How it works:
- The generator produces electricity and sells it through a licensed supplier (or balancing-responsible entity).
- The corporate buyer signs an offtake arrangement where the supplier “sleeves” the electricity to the buyer’s consumption, while balancing and settlement are handled by the supplier.
Why businesses like it:
- buyer avoids becoming a direct balancing party,
- simpler operationally,
- suitable for multi-site loads.
Legal risk points:
- supplier credit risk (if supplier fails, the PPA economics can collapse),
- pass-through of imbalance and network charges,
- certificate integrity (YEK-G).
4.2 Direct PPA with an eligible market participant
Where the buyer has the capacity and appetite to assume market responsibilities, a more direct structure may be possible. The legal work focuses on:
- settlement responsibility allocation,
- collateral and payment security,
- and governance of scheduling/forecasting.
4.3 Virtual PPA (financial hedge)
Used where physical matching is difficult. Legal drafting must be unusually precise on:
- reference price definition,
- settlement period and calculation methods,
- fallback pricing if market rules change,
- and “disruption events” (price spikes, negative pricing logic, suspension of market data).
5) The “bankability checklist”: what makes a PPA financeable in Turkey
If a lender or an investment committee reviews a PPA, they typically look for these core features:
5.1 Clear product definition: what exactly is being sold?
A finance-grade PPA precisely defines:
- contracted capacity (MW) and/or contracted energy (MWh),
- delivery profile (baseload, pay-as-produced, shaped),
- measurement point and metering responsibility,
- whether storage is included (and how charge/discharge is treated).
Ambiguity here leads to disputes and “value leakage” through settlement surprises.
5.2 Pricing model that survives volatility
Common pricing models:
- fixed price per MWh,
- indexed price (inflation, FX, commodity proxy),
- collar (floor/cap),
- stepped price schedule,
- hybrid model (fixed + merchant share).
Legal safeguards:
- define index sources and publication timing,
- define fallback index if a source is discontinued,
- define rounding, taxes, and invoice currency clearly,
- define treatment of negative or extreme prices (if relevant).
5.3 Payment security and credit support (non-negotiable for real projects)
Typical instruments:
- parent guarantee,
- bank letter of guarantee,
- escrow / reserve account,
- advance payment and reconciliation,
- termination payment and liquidated damages.
Payment security should align with:
- offtake period,
- expected monthly exposure, and
- the consequences of default (especially if the project is financed).
5.4 Curtailment and dispatch risk allocation
Curtailment is one of the most litigated “economic risks” in renewables. A bankable PPA must define:
- what counts as curtailment (TSO/DSO instruction vs internal constraint),
- whether compensation is owed (“deemed energy”),
- whether curtailment triggers extension of term, and
- how curtailment interacts with certificates (YEK-G issuance for curtailed MWh is generally not possible; the contract must not promise it).
5.5 Imbalance, balancing, and settlement corrections
Even a well-priced PPA can become loss-making if imbalance costs are misallocated. A robust PPA defines:
- who bears imbalance costs and benefits,
- who controls forecasting and nominations,
- how settlement corrections after the initial invoice are handled,
- what audit rights exist to verify settlement statements.
Because Turkey operates structured market and settlement mechanisms under its electricity market framework, aligning the PPA with settlement reality is essential. (epias.com.tr)
6) Renewable attribute contracting: YEK-G certificates and “green claims” that hold up
Corporate PPAs often exist because the buyer wants:
- long-term price predictability, and
- credible renewable sourcing.
Turkey’s YEK-G system and organized market are designed to certify renewable electricity usage and allow certificates to be traded independently of electricity. (epias.com.tr)
6.1 What the PPA should say about certificates
A well-drafted PPA covers:
- which party is responsible for requesting issuance of certificates,
- transfer mechanics (bilateral transfer vs organized market purchase),
- timing (month of production vs retirement window),
- retirement/usage rules (so the buyer can claim consumption credibly),
- price treatment (bundled with energy price or priced separately),
- remedies if certificates are not available (e.g., alternative certificates, price adjustment, or liquidated damages).
6.2 Avoiding “double counting” and reputational risk
Buyers increasingly require warranties that:
- the same MWh certificate will not be sold twice,
- certificates will be retired in the buyer’s name (or as instructed),
- and claims will be consistent with public disclosures.
If the contract is silent, disputes appear later—especially during ESG audits, M&A due diligence, or lender compliance reviews.
7) Regulatory and corporate constraints that can affect PPAs
7.1 License and corporate changes: share transfers and security packages
Energy assets frequently involve project finance and equity exits. In Turkey, certain share transfers and control changes in the electricity market may be subject to EMRA board approval or notification requirements under the licensing framework (particularly for preliminary license holders and certain licensed entities). (Türk Hukuk Blogu)
Why this matters to PPAs:
- If financing requires share pledges or control protections, the transaction timeline must account for regulatory approvals.
- A PPA should include a covenant that the seller will maintain regulatory compliance and obtain required approvals to avoid threatening the project’s license (and therefore the PPA’s performance).
7.2 Change in law and regulatory change
Turkey’s energy regulation evolves. A bankable PPA includes a detailed change-in-law clause that addresses:
- new taxes and levies,
- changes in market settlement rules that affect imbalance costs,
- changes in certificate systems,
- new grid code obligations that impose retrofit costs.
The clause should specify:
- who bears which changes,
- renegotiation timetable,
- adaptation mechanism (price adjustment formula or independent expert determination),
- and termination rights if adaptation fails.
8) Force majeure, hardship, and contract adaptation: practical drafting for Turkish realities
Energy projects face events that can disrupt performance: natural disasters, major grid events, export bans affecting critical components, or extraordinary market disruptions.
A finance-grade PPA should:
- define force majeure events,
- require prompt notice and mitigation,
- define time relief vs cost relief,
- set a long-stop date for termination,
- address partial performance and priority allocation.
Separately, for major economic shocks, Turkish contract law concepts on excessive onerousness can become relevant, but lenders generally prefer contractual adjustment mechanisms rather than litigation-based rebalancing. The best approach is to include a tailored adaptation clause (price review, indexation adjustments) and a clear dispute process.
9) Termination provisions that protect both sides (and satisfy lenders)
Termination clauses should be written like a risk management tool, not a threat.
Common termination triggers:
- payment default beyond a cure period,
- repeated performance failure,
- extended force majeure,
- insolvency events,
- license cancellation or inability to deliver due to regulatory restriction.
The bankability feature: termination payment
If a project is financed, lenders often require a termination payment mechanism:
- to protect debt service when the offtaker defaults, or
- to compensate the offtaker if the generator defaults (depending on bargaining power).
A termination payment clause must define:
- calculation basis (NPV, replacement cost, market-based),
- discount rate,
- cost items included/excluded,
- and dispute resolution method (expert determination is often faster than court).
10) Dispute resolution: courts vs arbitration, interim measures, and evidence discipline
10.1 Choosing the forum
For corporate PPAs—especially cross-border deals—arbitration is frequently preferred for:
- confidentiality,
- technical expert management, and
- international enforceability.
For purely domestic transactions, Turkish courts remain common, but sophisticated parties still often use arbitration for speed and expertise.
10.2 Evidence discipline: how PPA disputes are actually won
Most PPA disputes turn on:
- metering data, settlement statements, and reconciliation logs,
- forecasting/nomination records,
- curtailment instructions and grid operator communications,
- certificate transfer and retirement records.
A PPA should require:
- data retention periods,
- audit rights,
- and a structured dispute escalation process before litigation (technical committee → senior executives → mediation/expert → arbitration/court).
11) Tax, accounting, and compliance clauses that prevent expensive surprises
Even when parties agree commercially, projects can fail due to tax and compliance blind spots. A strong PPA clarifies:
- VAT and invoicing treatment,
- stamp duty allocation (if applicable under Turkish practice),
- withholding tax considerations (cross-border),
- FX payment rules and convertibility,
- set-off rights and limitations.
Because these items can be deal-specific, the PPA should include a tax “cooperation clause” and an obligation to structure invoices in a compliant manner.
12) A practical “PPA term sheet” roadmap for Turkish projects
If you want to move from concept to signature efficiently, this is the sequence that reduces risk:
- Regulatory positioning memo
- Is the PPA physical or virtual?
- Who holds the supplier role?
- Who bears balancing responsibility?
- Will certificates be delivered (YEK-G), and how? (epias.com.tr)
- Commercial term sheet
- term, volume, price, indexation, security package.
- Grid and settlement due diligence
- connection point, curtailment history, metering integrity, data access.
- Draft PPA + side documents
- guarantees, direct agreements (if financed), certificate annex, dispute process.
- Bankability review
- lenders check step-in rights, termination payment, assignment restrictions.
- Closing and post-signature governance
- forecasting protocols, settlement review calendar, certificate transfer schedule.
13) Common pitfalls in Turkish PPAs (and how to avoid them)
- Treating a PPA like an ordinary supply contract
Without addressing imbalance, curtailment, settlement correction, the contract will leak value. - Promising renewable claims without certificate discipline
If YEK-G is part of the value, the contract must specify issuance, transfer, retirement. (epias.com.tr) - Ignoring regulatory approvals in project finance or equity transfers
Regulatory approval timelines can derail closing if not planned. (gonen.com.tr) - Weak change-in-law drafting
Energy regulation evolves; vague clauses produce disputes rather than solutions. - Inadequate credit support
A long-term contract without a credible security package is often “unbankable.”
Conclusion: a well-structured PPA is a legal product, not just a commercial deal
In Turkey’s regulated electricity market—designed to operate under private-law principles with independent regulation—PPAs succeed when the contract mirrors market reality. (epias.com.tr)
For developers, a PPA can:
- stabilize revenue,
- support financing,
- and improve exit valuation—if risk allocation is clean and enforceable.
For corporate buyers, a PPA can:
- lock in energy costs,
- improve procurement certainty,
- and support credible renewable sourcing—especially when certificate delivery (YEK-G) is contractually disciplined. (epias.com.tr)
The difference between a “good-looking” PPA and a bankable PPA is not length—it is precision: settlement alignment, curtailment rules, credit security, change-in-law mechanics, certificate integrity, and a dispute process built around evidence.
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