EBRD provides first loan in local currency to Turkish company

By EBRD  Press Office

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The EBRD is supporting the privatization of the energy sector and the development of the local capital market in Turkey with a local currency loan to IZGAZ, Turkey’s third largest gas distributor.

Following the privatisation of IZGAZ in January 2009, the Bank is providing a senior loan of the equivalent of €60 million (approximately 129 million Turkish lira) to help Izgaz finance its capital investments.

Izgaz will use the proceeds of the loan to expand its natural gas grid to connect new customers from the region of Kocaeli with the rest of the country’s gas network. Kocaeli, which is located 80km east of Istanbul, is one of the leading economic regions in Turkey and has a strong demand for gas. Currently IZGAZ has 180,000 residential and 80 industrial customers.

Expansion of the gas grid will support use of cleaner and more efficient fuel, reducing the reliance on heavy fuel oil and mazut. It will also help IZGAZ to improve its operational efficiency.

In addition, funds will be used to refinance a part of a loan from GDF SUEZ, the majority shareholder in IZGAZ since the privatization.

The International Finance Corporation will co-finance the project, proving an additional loan to IZGAZ of the equivalent of $50 million in local currency.

“Through this transaction the EBRD is reinforcing its commitment to supporting privatization in Turkey. The financing offered by the Bank will help IZGAZ efficiently implement its investment programme in the current challenging environment, which will send a positive message to other potential investors and will ensure commercial interest for investments in the utilities sector,” said Nandita Parshad, Director of the Power and Energy Utilities Team of the EBRD.

"These loans bear witness to the confidence in Izgaz shown by big financial institutions, and mean that we can now finance our gas distribution growth plan in the Kocaeli region”, said the Managing Director of IZGAZ, Imad Erdogan.

Following the decision of the EBRD’s Board of Governors to accept Turkey as a recipient of EBRD investments in October 2008, this is the second investment made by the Bank in Turkey.

In May the EBRD has signed a €45 million loan for the construction of the largest wind farm in Turkey. By 2010 the EBRD plans to invest up to $600 million in the Turkish economy.

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