EBRD to invest €250M in Turkish energy sector in 2019

By Nuran Erkul Kaya

ANKARA (AA) - Turkey's energy sector has been attracting around €250 million ($280 million) per year from the European Bank for Reconstruction and Development (EBRD) and the bank plans to maintain the same levels of financing in 2019 as well, Managing Director for Sustainable Infrastructure Group at the EBRD said Wednesday.

Nandita Parshad, managing director for Sustainable Infrastructure Group of the EBRD, had an exclusive interview with Anadolu Agency in Istanbul on the EBRD's future plans for Turkish energy sector.

To date, the EBRD has invested directly about €1.6 billion in the energy sector in Turkey in 22 cases with loans, equity and bonds.

Parshad stated that the average amount the bank invested in Turkey's energy sector is €250 million.

This year, the EBRD has already invested $100 million in a stake of Ictas Surdurulebilir Enerji Yatirimlari, the renewable energy arm of Turkey’s IC Energy Holding, she said. The firm owns a portfolio of 10 hydropower plants with a total capacity of 400 megawatts.

"With the injection of the EBRD funds, it now plans to invest in wind farms and solar projects with a combined capacity of up to 250 megawatts. Equity is a great way for us to support the further growth of renewable energy in Turkey," Parshad said.

She added that the EBRD investment in Ictas will also partly finance the recent privatization of Kadincik hydropower plant, in Mersin, in the south of Turkey.

Ictas won the privatization tender of Kadincik hydropower plants with 126 megawatts in total. "So that there will be more private sector players in Turkish power generation sector, which is a good thing for more competition paving the way for lower power prices and diversification of supplies," Parshad said.

"We are also a shareholder in Akfen Renewables. This is an excellent example of how the combination of debt and equity can boost a company and the entire sector. The EBRD became a shareholder in Akfen Renewables in 2015 and provided a separate financing package of $102 million in September 2018. With this investment, we financed the construction of four windfarms and nine solar projects with a total capacity of 327 megawatts," Parshad explained adding that it was the largest single financing of a renewables portfolio.

- Renewable sector needs certainty for post-2020 period

She said that the EBRD is currently working on a number of projects for new investments in Turkish energy sector. However, she could not provide further details as the negotiations are at early stages."What is important however is that we maintain a clear focus on the renewables sector in Turkey, and we will continue to look for ways to boost the sector. We are also keen to support distribution businesses, both in terms of reaching more customers and integrating new renewables into their grid," Parshad said.

Parshad pointed out to the fact that Turkey needs to put a clear framework for renewables in place and added that the investors including the EBRD need certainty to be able to make informed decisions.

Turkey currently has feed-in-tariffs for renewable energy power plants under Renewable Energy Support Scheme (YEKDEM). The feed-in-tariffs is $0.133 for solar and biomass, $0.105 for geothermal, $0.073 for wind and hydro plants and it is valid for 10 years.

Turkey's Energy and Natural Resources Ministry plans to end YEKDEM by 2020 and it is yet uncertain what will happen after the termination of the scheme.

"The EBRD has already contributed its ideas to a new support scheme for renewables for the post-2020 period and we hope the government finds them useful. We are looking forward to this new scheme which we hope will unlock further investment in the sector," she noted.

- Ready for a role in a well-structured NPL vehicle

Parshad also mentioned the EBRD's interest to deepen its work in the area of non-performing loan (NPL) resolution mechanisms in Turkey.

She said the EBRD has already financed Hayat Varlik, a leading NPL asset management firm, in which the bank is also a shareholder.

Turkey is in preparation for creating an Energy Venture Capital Fund for NPLs in the sector. Over the last 10 years, in the financing of a number of energy projects in which banks provided $70 billion credit, investors repaid $23 billion but the repayments of the financing balance of $12-13 billion became problematic.

A group of banks authorized a refinancing scheme in the last two years to recuperate the $12-13 billion, leaving a $2 billion outstanding debt. To recover the $2 billion, the banks are working on the structure of the fund.

"We haven’t been approached yet with a sufficiently mature proposal to invest in an NPL special-purpose vehicle but we would look at it if one came, and are ready to engage, if the structure meets our commercial and sound banking requirements," Parshad stated.

Speaking of the outstanding debt in the Turkish energy sector, she quoted from Tolstoy’s Anna Karenina that "happy families are all alike, every unhappy family is unhappy in its own way."

"Similarly, in the Turkish energy sector there is no-one-size-fits-all solution. In some cases energy projects need cash injections, others need restructuring, it depends.

What is important is that we as the EBRD are - first - ready to support the sector as a whole, and - second - have a range of instruments that can address many sources of unhappiness," Parshad said.