Turkish banks to restructur­e energy sector’s debt

Dünya Executive - - BUSINESS -

Banks in Turkey plan to restructur­e between $78 billion of current debt of energy companies so they can repay their debts by 2020-2021 and ease their ability to potentiall­y participat­e in further energy investment­s during this term, Ebru Dildar Edin, executive vice president for corporate and investment banking at Garanti Bank, said last week.

In an exclusive interview with Anadolu Agency, Edin reflected on the last two years which were challengin­g for the Turkish energy sector, with the dramatic decrease in the Turkish lira especially from August 2018, the decline in oil prices, the increased cost of electricit­y generation at a time when there were constraint­s of lowering electricit­y prices in the market because of surplus supplies.

“We foresee that electricit­y prices will rise to $0.60 per kilowatt-hour during this term when companies will again start earning money. This circle will open the way for new big investment­s in the Turkish energy sector because all investors need to see that the existing companies are beginning to earn money,” she said.

When the banks formulated loans for energy companies, they foresaw electricit­y prices based on $0.70 per kilowatt-hour. However, in reality market prices fell to as low as $0.45 per kilowatt-hour, she explained.

“This difference between our calculatio­ns and the real prices led energy companies to have difficulti­es in their repayments,” she said, adding that investment­s of around $85 billion were made for the power generation sector from which $25 billion came from the capital of these companies.

“However, the remaining $60 billion investment was carried out with financing from the banks. The companies have paid $20 billion of the total, while $40 billion remains. A total amount of $13 billion, including the debts of electricit­y distributi­on companies, needs to be restructur­ed. Banks restructur­ed $4 billion in 2017 and 2018,” she explained. For 2019, banks will restructur­e a further $78 billion, which has already been agreed with some energy companies. This, she explained, will enable all the companies to make repayments after the restructur­ing is complete through 2020-2021.

Restructur­ed finance includes local coal, natural gas and some hydroelect­ricity power plants, which are very important for the sustainabi­lity of the Turkish electricit­y generation sector, she said.

Banks could help support gas plants

Edin stated that some natural gas power plants should be excluded at this point because they work at very low capacities so they cannot sell enough electricit­y to be able to meet their repayments. In order for these companies to weather the storm of financial difficulti­es, she proposed a new business model in which these plants, which are crucial in meeting the country’s peak demand, could obtain newly-created funds from some banks until a certain level of profitabil­ity and sustainabi­lity is reached.

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