Securitization Of Financing For Wind Turbines In Turkey

By Onur UlusakaryaADMD Law Office, Istanbul TURKEY

Overview

As demand for energy increases in Turkey, investments in this sector is boosting with the help of the government. Incentives focus on renewable energy resources for obvious efficiency and environmental considerations and specifically wind energy investments had been very popular due to vast resources of Turkish geography. Therefore the government is trying to optimize financing conditions to attract more investment in the field.

Although such target of the government is quite clear, the legal complexities are still experienced in the market since creditors are seeking better and less costly ways to secure their loans provided to energy investors in Turkey. The most commonly experienced financing model for wind energy investments is the financing of the wind turbines themselves of which securitization may be more complex then it seems.

Here I would like to summarize some available securitization alternatives for wind turbines that may be used for the purposes of a hypothetical where a wind turbine is financed by the creditor and the debtor will place such turbine in its energy production facilities.

Commercial Enterprise Pledges

Although there are certain and limited number of exceptions, regular pledge over movable properties such as machinery and equipment (that may include the turbines) is subject to a simple written agreement along with the delivery of the movable property (possession) to the borrower pledge right holder (creditor) as escrow (for safe keeping purposes). The only right that is obtained in return legally is the sale though legal execution methods and there is no way to keep the property as own for the borrower though the obligation to proof actual ownership shifts to the debtor if the property is re-sold. Regular movable pledges could be executed with minimum expenses, close to ignorable as effort to execute an agreement. However this pledge system is neither practical nor helpful in the targeted projects since it requires the transfer of the financed machinery, here wind turbines to the creditor as well. In order to find a solution for the delivery problem we refer to one of the exceptions of regular pledges above mentioned, thus called commercial enterprise pledge ('CMP').

A commercial enterprise is an organized work place registered in the Trade Registry on behalf of an individual or a commercial entity (company) where commercial or industrial activities are rendered. One company is entitled to have numerous commercial enterprises in different regions and accordingly may have more than one commercial enterprise. CMP is a pledge to be established with an agreement and registration of such agreement and the listed pledged property of the commercial enterprise to the Trade Registry. It has a specific law designating its details titled Commercial Enterprise Law No.1447 dated July 21, 1971 and also detailed regulations regarding CMP are also available. CMP's could include the following properties of a commercial enterprise:

1. Trade name and enterprise title;

2. Machinery, equipment, tools and motorized vehicles currently available and designated for the purpose of the commercial enterprise;

3. Patents, trademarks, models, designs and similar licenses which constitute industrial properties of the commercial enterprise.

The above is a restricted list and could not be widened to include any other properties of the commercial enterprises and a CMP could not exclude the trade name and enterprise title. Accordingly it is up to the parties' discretion to include or exclude the other items listed and naturally wind...