Turkey’s Garanti sees subdued demand for project finance in 2017

By Can Sezer and Birsen Altayli

ISTANBUL (Reuters) – Low electricity prices and volatility in Turkey’s lira mean demand for finance for projects is unlikely to pick up much this year from a subdued 2016, a senior executive at Garanti Bank, one of Turkey’s biggest lenders, said in an interview.

Ebru Edin, who is in charge of project finance at Garanti, said she expected around $ 15 billion (12 billion pound) worth of projects to require funding by the Turkish banking sector in 2017, on a par with last year’s figure but down from $ 23.5 billion in 2015.

“We can say that 2015 was a record year … but financial volatility and geopolitical uncertainties in 2016 have forced investors to wait for a while,” she told Reuters on Friday.

Much of Turkey’s project financing needs have come from the energy sector in recent years, but low electricity prices mean power firms are reluctant to make new investments and are instead seeking to refinance existing ones.

Demand for transport infrastructure funding has also fallen, with only a few tenders due this year, Edin said.

“Our driving force is energy and highway projects, but one of the highway tenders was already done. Prices in energy were low … so it was a slow year (in 2016),” she said.

“Volatility in the exchange rate also slowed operations, especially involving foreign funds.”

The lira (TRYTOM=D3) fell as much 10 percent against the dollar in the first few weeks of 2017, hurt by concern about insecurity after a spate of bombings, political uncertainty ahead of an April referendum, and slowing economic growth.

It has recovered somewhat, but is still down 4 percent this year, on top of double-digit falls in 2015 and 2016.

Edin said lira financing, once a rarity for major projects, was on the rise as a result.

“We previously gave only two loans in lira for major projects … (but) last year, we increased our credit volume in lira by 80 percent,” she said.

Edin said she expected financing for a 7 billion lira ($ 1.92 billion) highway project connecting to a new bridge spanning Istanbul’s Bosphorus Strait to be completed this year. Two Turkish consortia, Limak Holding and Cengiz Holding, won tenders to build the two sections of the project last May.

Financing for a suspension bridge over the Dardanelles Strait is expected to be closed early in 2018, she said, while five or six of seven city hospitals whose tenders have been completed could see their financing closed this year.

Garanti’s current project financing portfolio is around $ 12-12.5 billion, half of it for energy investments, Edin said. She expected around 3 percent growth in 2017. The bank provided $ 2.3 billion of new financing last year.

(Writing by Tuvan Gumrukcu; Editing by Nick Tattersall)