The World Bank Supports Renewable Energy in Turkey
The World Bank approved a US $202.03 million Renewable Energy Loan for Turkey.
The main objective of the project is to increase privately owned and operated power generation from renewable sources such as hydro and wind within the market-based framework being implemented in accordance with the 2001 Turkish Electricity Market Law and the Electricity Sector Reform Strategy approved by the High Planning Council on March 18, 2004.
The project ties into the priorities of the Turkish Government, including the development of indigenous and renewable resources, as well as the expansion of the private sector generation within the new market structure without requiring government guarantees. In line with the focus of the World Bank’s assistance program in Turkey, the project would support convergence with the EU on environmental and renewable energy targets; and fiscal stabilization by spurring private sector investment in power generation without the government having to take on additional liabilities.
“Turkey is unique amongst other European countries in having an abundant endowment of renewable energy resources. Its unexploited hydro resources alone could provide an equivalent amount of electricity capacity as that installed today,” said Andrew Vorkink, Country Director for Turkey. “The Renewable Energy Project will help develop these resources economically, in a manner that is consistent with the electricity market liberalization program that Turkey has initiated. The project establishes an efficient financial intermediation mechanism that will assist Turkish entrepreneurs in leveraging their capital to develop renewable resources economically. We expect that this framework can provide the foundation to scale up renewable energy development in Turkey. In addition, this framework can channel other sources of grant and concessional funding from other donors, including the EU, for renewable energy resource development.”
The Renewable Energy Project establishes a term lending facility within the Türkiye Sinai Kalkınma Bankası (TSKB) – the Turkish Industrial Development Bank (private) and Türkiye Kalkınma Bankası (TSKB) – the Turkish Development Bank (Government). TSKB and TKB will make loans to qualified private sponsors of renewable energy generation projects. The World Bank loan will supplement sponsor equity, commercial loans and export credits to lead to a total investment in excess of $500 million
The Renewable Energy Project, for the first time in Turkey, utilizes a special loan structure offered by the World Bank that allows the financial intermediaries, TSKB and TKB, to better match the timing of their loans to private sponsors. Effectively, TSKB and TKB can offer a maximum maturity of 12 years including 4 years grace on their loans to private sponsors–although the credit risk of the underlying project and sponsor may lead to shorter maturities in practice.
Referance: The World Bank