Build-Operate-Transfer

Under the BOT model, private investors built and operated power plants. After remaining in private ownership for a number of years corresponding to the economic lifetime of the investment (typically fifteen to twenty years), these power plants were transferred to state ownership, i.e., to the Turkish Electricity Transmission Company (TEIAS). The BOT Law contained a number of provisions designed to encourage investment. These included exemptions from customs duties and deferral of VAT payments on certain types of imported equipment. Most importantly, the law provided that the Turkish Treasury could back up the power purchases contracted between the BOT investor and TEAS or TEDAS (the two state-owned electricity suppliers) with a treasury guarantee. All types of BOT projects listed in the 1994 BOT Law were automatically defined as concessions. Following construction and start-up of the plant, generation costs varied because of changes in fuel prices, labour costs, tax law, etc. These were passed on to consumers through the electricity price, and could also be compensated through an electricity fund, which was financed through a tax on electricity consumers. The main purpose of the fund and the tax was to ensure security in electricity prices by providing an additional state guarantee to BOT schemes and by moderating sudden changes in electricity prices paid by TEAS by averaging this price on a yearly basis.