A wind farm in Osmaniye region of Turkey is receiving a €45 million investment from the EBRD. Turkey became one of the EBRD's countries of operations in October 2008 and represents the second largest economy in the Bank’s region.
In its first project in Turkey, the EBRD is supporting the development of the country's largest wind farm, which will be built by Rotor Elektrik, a member of Zorlu Energy Group. “We met a number of companies in Turkey last year to learn more about their projects,” explains Nandita Parshad, Director of the EBRD Power and Energy team. “Zorlu Energy's proposal to build a wind farm was a good and quite advanced project, for which most environmental and technical work had already been completed,” she added.
Large growth potential despite crisis
In common with many other business actors, the client’s financing of the project suddenly became uncertain with the onset of the financial crisis. “Two banks were supposed to provide loans, but they could not complete the financing on their own,” says Ms Parshad. International financial institutions (IFI) stepped in with the EBRD providing €45 million, the IFC €55 million and the EIB €30 million to help finance the project.
The Turkish electricity market is the sixth largest in Europe and offers great opportunities for investors: it is one of the fastest growing markets globally with an annual increase in energy consumption of around 8 per cent since the 1980s. However, Turkey still has a very low overall consumption rate, which highlights the potential for growth in its power sector.
Two for the price of one – boosting green energy and privatisation
“Turkey relies heavily on gas imports from Russia and is currently locked in with high prices,” remarks Andi Aranitasi, Principal Banker in the EBRD's Power and Energy team. “One of the project’s aims is to encourage the use of renewable energy, but also to reduce the country’s dependence on energy imports,” he adds. "Supporting a wind farm project is a very reasonable choice, as it is the form of renewable energy that can be developed the quickest," explains Ms Parshad.
In fact, wind power comprises less than 0.5 per cent of total electricity consumed in Turkey and the wind farm is the largest renewable energy enterprise undertaken so far on a project finance base. Successful completion is therefore likely to have a considerable demonstration effect for similar energy projects, especially as Turkey has committed to increase the share of renewable energy in its energy portfolio. Wind power is expected to play a significant role in this plan and the country aims to generate 10,000 MW through wind farms by 2020.
“The Turkish energy sector is still very much in public hands: 60 per cent is publicly owned and only 40 per cent is held by private companies,” explained Philip Lam, Associate Banker in the EBRD's Power and Energy team. The project is therefore also intended to increase the percentage of private ownership in the energy sector.
“The project is an exemplary showcase for IFI cooperation. Although a number of different institutions were involved, we got to the finishing line in record time," concludes Ms Parshad.