A vote of confidence in Turkey’s new risk-free rate

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In December 2019, the EBRD provided a comprehensive local-currency financing package worth US$ 225 million to an energy company in Turkey to fund its ongoing investment programme. It was the first EBRD loan linked to the new Turkish Lira Overnight Reference Rate (TLRef) benchmark index.

Investing to upgrade Turkey’s power networks

Enerjisa Enerji is a leading Turkish electricity distribution and retail business, serving a population of 21 million in three regions. It is a joint venture between Sabanci Holding and E.ON, each of which hold a 40 per cent stake. The remaining 20 per cent is floated on Borsa Istanbul.

The investment programme will upgrade and expand the company’s existing distribution network and modernise customer metering. The investments will reduce technical losses and improve network operation.

A new benchmark that meets international standards

This landmark project was the first EBRD loan linked to the new TLRef benchmark index. The TLRef is the risk-free rate for the Turkish market. It was developed by the TLRef Committee, comprising representatives of Turkey’s Ministry of Treasury and Economy, the Central Bank, the Turkish Banks Association, the Turkish Capital Markets Association and Borsa Istanbul. The EBRD Treasury advised the TLRef Committee on defining the benchmark to ensure it would be in line with international standards.

Innovation and a drive for gender equality

Unlike term rates, for which the interest rate payable by the borrower is set at the beginning of the interest period, the interest rate due on a TLRef-linked loan is compounded during the interest period and paid in arrears. The EBRD worked with Enerjisa Energy to devise the commercial terms of this inaugural TLRef product, which set the standard for future projects.

The mechanism is consistent with global efforts to reform interbank overnight rates (IBOR) and the EBRD Treasury was pleased to be able to play its part in underpinning the use of the new standard.

As part of the loan facility, the EBRD and Enerjisa Enerji will also work together to advance equal opportunities in Turkey’s power industry, with a focus on securing women’s access to jobs across the sector.

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