Turkey Deals Seen Flatlining as State Dominates Big Projects

Deals in Turkey’s project-finance market are hitting a wall despite the government’s efforts to invest in roads, energy and hospitals in the face of slowing economic growth and a weakening currency.

The value of project-finance deals will probably remain little changed this year from the $13.2 billion of loans provided in 2016, according to Turkiye Garanti Bankasi AS, the country’s largest lender by market value.

Garanti, a unit of Spain’s Banco Bilbao Vizcaya Argentaria SA, is also standing pat, with loans for projects expected to match the estimated $2.5 billion extended last year, Ebru Dildar Edin, the executive vice president in charge of project finance, said in an interview in Istanbul.

A deterioration in Turkey’s economy is being compounded by political instability, security risks and a currency which has dropped 20 percent over the past 12 months. That has decreased investor appetite for large infrastructure projects and asset sales that are undertaken by the government, and cut the amount set aside for project-finance loans, which averaged an annual $20 billion in the previous three years.

About $2.6 billion of project loans closed last year went to hospitals, roads and airports involving government partnerships, Edin said. This could rise to $10 billion this year, she said.

There will some deals for planned solar and wind contracts, as well as refinancing of earlier developments, and new infrastructure programs this year, she said. “Garanti will be active in renewable-energy projects, including wind and solar power.”

Refinancing Loans

A $5 billion project to build a network of roads, including a suspension bridge, across the Dardanelles strait, hospitals being constructed through public-private partnerships, and other transport programs, such as the North Marmara motorway and Ankara-Nigde highway project in central Anatolia will present financing opportunities, Edin said.

“Financing will be above $2 billion in the North Marmara highway,” she said. “Besides those, renewable-energy projects and refinancing of previous loans will be on top of the agenda. We think Turkish banks will largely be financing these,” she said.

Garanti’s share in total energy financing among Turkish banks amount to about 18 percent, with an exposure of $13 billion, Edin said, adding that natural gas and coal-fired energy producers will be facing another difficult year due to falling electricity prices.

“Despite difficulties we don’t see bankruptcies, those investments are strategically important and companies may recover with support from owners and banks in the next two to three years,” she said.

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