Crescent Capital founder Aygen Yayıkoğlu speaks to Jonathan Moore about investing in renewables in Turkey, the recent development the country’s energy market and what the future holds for Turkish law firms

Tell us about your company, Crescent Capital

At the end of 2011 we launched Turkey’s first private equity fund with a focus on the energy sector and that’s been investing since 2012. We still remain the only – the pioneer – sector-focused fund manager solely focused on energy and infrastructure in this market.

There is a huge amount of investment happening in Turkey at the moment in energy and infrastructure. There is a great deal of need for additional equity as well as sector expertise. We felt that being a pioneer first-mover in this area would be a great advantage and that’s why we decided to launch this fund.

You mention the need for sector expertise, what do you and your team bring?

I and everybody else on the team have spent all their careers in project finance, energy and infrastructure. Since it is a sector-focused fund everybody in the team has a background in energy investing and the financing of energy and infrastructure projects. This is why we have the backing of international financial institutions that currently invest in our first fund. I personally spent about 10 years in London working at the EBRD’s (European Bank for Reconstruction and Development) power and energy team and then I ran a number of EBRD offices in the field. I was then at the IFC (International Finance Corporation) in Istanbul, after which I left and established Crescent Capital.

How do you see your practice developing over the next five years?

Well, the huge volume of projects that are under development and under construction, along with those already operational, actually demands a further injection of equity. Our intention is to expand and build Crescent to be the leading platform to help investors place capital in energy and infrastructure in Turkey and the surrounding regions. That’s our vision. With the launch of a couple of new vehicles and funds we will continue to place capital on a large scale in these sectors throughout the region.

Do you have a specific focus within the energy and infrastructure space?

Our current fund, the first fund, had a primary focus on clean energy and that theme is going to continue. Basically clean and low emission power generation is going to remain our aim for future investments. However, we are also experienced in, and looking at, other types of energy and infrastructure deals including transport and other types of social infrastructure with contracts and long-term cash-flows. But I would say that in the medium term at least the clean power generation theme is going to be the core of our firm.

What is about Turkey energy market that makes it such an attractive investment opportunity at the moment?

Well, there are very few markets in the world where you have such an amount of new additional capacity coming online. In 2014, there were more than 5,500 megawatts of newly-installed capacity that came online. That is a larger sum than most small or medium-sized countries have in total installed capacity yet here that came online in one year alone.

In the last five-to-seven years there has been more than $50 billion of investments, on a private basis, that have happened in the energy and infrastructure space in Turkey. So by the sheer size of existing and past activity, and the planned activity in the future, obviously it’s a market that is a very important one for sponsors, developers and investors.

With regard to the abundant supply dynamics and the ability to get projects done, to get them off the ground, this market has demonstrated that capability pretty well in the past few years and there are going to be a lot more investments in this area over the next 15-20 years.

Is that growth going to be seen in renewables, or across the board?

Turkey is a country which is trying to keep up with demand for power so in terms of additional capacity coming online and the pipeline of projects in the coming years it is renewables, thermal, and all types of other projects. We don’t see one particular area dominating the others. There is nuclear power under development, there are imported coal projects, there are local coal projects, there is hydro, wind, geothermal, etc. That’s also what makes it such an interesting market because there is a bit of almost everything happening here at the moment.

Are there any areas of particular interest to foreign investors?

It’s across the board, really. In our sector there are good wind projects and there are bad wind projects, there are good hydro projects and bad hydro projects. Therefore I think it’s difficult to generalise. The interest and the opportunity exists in all areas of power and infrastructure and I think it’s up to the skill of the investors to really find deals that are more attractive than others.

What would you say are the biggest challenges in getting new projects off the ground?

I think there are three areas which investors need to focus on. One of them is the long lead times in getting a project from scratch to COD (commercial operation date). This is a common theme in energy in general but I would just underline that this is the case in Turkey as well. Starting a licensing or bidding process, getting a licence, getting all the permits in place, getting it constructed and so on, that’s a long process so you have to be a patient investor.

Number two is the price uncertainty. In many markets you may have either PPAs (power purchase agreements) or long-term feed-in tariffs whereas in Turkey you have a short, unindexed feed-in tariff and most projects actually rely on market prices in the future. So you need to be very comfortable and confident about understanding the sectorial dynamics with regard to future electricity prices.

Number three is probably local competition. As opposed to many other emerging markets there is availability of local capital. There are a lot of local entrepreneurs, smaller companies, mid-sized, larger companies, all active or trying to be active in this sector and therefore there is a high-level of competition.

How does the regulatory framework compare to other emerging markets?

There has been huge progress in regulations in the last 10 years. We have a regulator that has a pretty good track record over the last decade. However, the licence award system probably needs some improvement, especially with regard to the way the government filters investors. The current system does lead to open tenders and competition but it could be managed so the process is completed a bit faster. Right now it takes quite a bit of time.

Apart from that, though, the fact that there has been $25-$30 billion invested in generation projects financed on a private basis is the best proof that the regulatory environment works. Both Turkish and foreign investors are, as long as they have the right projects, ready to invest in the current environment.

In every country there are areas for improvement. The regulations are complex but the best test of whether they work is whether you have private investment going into a sector or not. We have currently billions of dollars of investment so it is basically working.

Is there much going on in the way of state investment?

The state policy has been to withdraw largely from power generation and private infrastructure. Power generation is an area where the state has said it is happy to leave this to the private sector while it focuses more on the grid and the backbone of the electricity transmission system and so on. That’s been the case except for some very large projects, such as nuclear, where the state itself is actually a partner. On the power generation side it has left the private sector to make the decisions to invest and keep the lights on.

Moving onto the legal market, what are your overall impressions of the Turkish situation as compared to somewhere like London?

I think it’s pretty in line with where the country as a whole is. It’s an almost-trillion-dollar economy with an advanced banking system and in parallel we have a good supply of law firms and lawyers. I think one of the major trends of recent years is that because of the huge amount of activity we have seen on projects there have been a lot of large foreign names entering the market and teaming up with good local firms. We expect a few more of these firms coming into the market and for this trend to continue for a few more years. There are only a few old, independent, larger Turkish firms left and it will be interesting to see whether they manage to remain independent or end up partnering with an international firm.

There have been a lot of firms splitting in the market recently, do expect to see a consolidation to fewer firms or for it to move in the other direction?

We actually see a trend in both directions. There are a lot of splits, with young ambitious lawyers teaming up to create their own small firms. But you also see consolidation at the other end of the spectrum. I don’t have a preference for either, though. We see both and I think it’s probably good to have both in the market so for any specific case you can decide which way to go.

What drives the decisions you make regarding outside counsel?

We like to do repeat business because we like to work with people that understand what the key issues we normally like to address in deals are. We are not exclusive to any one firm but there are advantages in working together with a firm multiple times so they get to understand your needs better.

If you’re working on a very large deal then of course there are other dynamics, in terms of other parties involved and lenders and who is conflicted with who. There are also cases where you really need specific expertise and so you go to the person or firm that has that. We deal with that on a case-by-case basis.

In terms of developing the market, how do see firms expanding their practice?

We see that firms have English law experience. Perhaps as they grow and become more internationally connected they will have more in-house counsel that can provide English law advice or other national law advice. They would benefit from that rather than having to refer a question to a firm in another jurisdiction if the underlying agreement requires it. So slowly I think we will see, as they expand, lawyers with those kind of qualifications being added to teams here in Istanbul.

We are dealing with project finance so I would say that English law, Swiss law, and other jurisdictions are very, very important in our sector. This is not entirely a Turkish law domain so we need firms and work with firms that are very comfortable in multiple jurisdictions.


Aygen Yayıkoğlu

Managing partner

Crescent Capital




Aygen Yayıkoğlu is the founder and managing partner of Crescent Capital, a private equity firm focused on energy and infrastructure. Aygen has 20 years of project finance and investment experience in emerging markets. His areas of expertise include public and private financing of power generation, transmission and distribution projects, privatisations of energy and infrastructure assets, energy sector restructuring, transport and municipal infrastructure concessions, oil and gas downstream projects and renewable energy investments.

Prior to establishing Crescent, Aygen spent ten years at EBRD’s headquarters in London and six years in the region, first heading EBRD’s country offices in the Balkans and the Caucasus, then at IFC’s regional infrastructure team based in Istanbul.

Crescent Capital is Turkey’s first energy-focused private equity fund which is investing in renewable power projects across Turkey, South Eastern Europe, and the Caucasus.