Page 67 - TURKRptJun19

In March, sources told Reuters that Japan’s Orix was also in talks to buy problematic loans from Turkish lenders.
$12-13bn of Turkish energy sector loans need restructuring: Garanti Bank deputy. Turkey’s energy sector has $12-13bn worth of loans that require restructuring, out of a total of $70bn, Garanti Bank’s deputy managing director Ebru Edin has told broadcaster Bloomberg HT. Garanti Bank, currency crisis- hit Turkey’s third largest lender by asset size, has financed several energy projects in the country. Around $23bn of the energy sector’s total loans have already been paid, Edin also said in remarks on May 2. In April, Finance Minister Berat Albayrak announced a plan to transfer some of the banking sector’s problem loans to off-balance-sheet funds. Two are to focus on energy and real estate. According to Edin, some debtors will be able to repay loans if terms are eased “but some of the projects may not be able to repay the debt even if restructured”. The planned energy sector fund will be placed under the management of a portfolio management company.
Creditors will be shareholders. After it is created, all problem companies will become separate funds and the creditors themselves will be shareholders, Edin said. After reaching an acceptable level of stability, the funds may transform into assets that could be sold to investors. That would relieve banks’ balance sheets, Edin said. More than half of the loans were given to renewable energy projects, she added, noting that with state-guaranteed energy purchases the problems with these loans were rather more limited. Turkey is almost entirely reliant on imports to satisfy its energy needs. The cost of those imports has leapt given the collapse in the value of the Turkish lira amid the currency crunch. The lira lost around a third of its value against the dollar last year and has weakened by around 12% versus the USD in 2019 to date. The currency crisis has left Turkish corporates sitting on a mountain of hard currency debt which they cannot pay off by exchanging lira earnings. The pressure on Turkey’s banks from increasing levels of non-performing loans (NPL) is starting to tell. Garanti Bank sold an NPL portfolio worth Turkish lira (TRY) 365mn ($61.4mn) for TRY19mn to Sumer Varlik Yonetim, the lender said on April 29 in a stock market filing.
Turkey to transfer up to five problem-loan-hit power plants to planned energy fund says Garanti executive. Turkish government officials and local banks are working on an Energy Venture Capital Fund as a method of refinancing problem loans in the energy sector worth up to $2bn, a senior executive from private lender Garanti Bank said. A bailout of Turkey’s construction sector is also under way—and sceptics have expressed fears that the taxpayer will end up with the bill in the long run. Four to five natural gas and hydropower plants with 1,500-2,000 megawatts of capacity will be transferred to the energy fund, according to Ebru Dildar Edin, vice president of Garanti. The Banks’ Association of Turkey (TBB) will take the initiative for the creation of the fund and invite lenders to join the entity. Participating banks will set up a portfolio management company. The portfolio management company will become an umbrella structure in which all banks will have equal shares. For each project, the banks will have shares in proportion to the credit amount provided to the project. "Under the portfolio management company there will be separate fund companies for each project with the non-performing loans transferred," Edin said, referring to the four or five separate fund companies that will work under the portfolio management company. Edin noted that a third independent institution would undertake the valuation of the projects based on current rates. The presented expectation is that as the projects will have fewer loan repayments in the fund, they will be able to recover, leaving room for revenue generation. “We foresee that Turkey's energy sector will recover in the coming three years. As the circumstances improve, these projects will be earning money again. After they start to become more valuable assets, we might think of selling them,” Edin added. Treasury and Finance Minister Berat Albayrak first floated the idea of creating a special fund to manage the non- performing loans in the energy sector, which has grown fast over the past two decades thanks to the widespread privatisation of energy assets, including generation plants and transmission networks. The energy companies’
67 TURKEY Country Report June 2019 www.intellinews.com