Turkish banks to restructure energy sector’s debt
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.