Project financing by Turkish banks up 20 pct

Despite terrorist attacks carried out by the PKK and DAESH terrorist organizations over the past year and the Gülenist Terror Group's (FETÖ) coup attempt last month, Turkey is progressing on its way to achieving its 2023 vision goals by realizing megaprojects, especially in the energy and infrastructure sectors. Banks reached a record high in funds raised for megaprojects such as the Osman Gazi Bridge and Yavuz Sultan Selim Bridge.

According to Banks Association of Turkey (TBB) data, project financing loans provided by banks increased to TL 223 billion at the end of June 2016 from TL 186 billion in the same period last year, achieving a 20 percent upsurge. Cash loans also soared to TL 195 billion from TL 155 billion in the same period, while non-cash loans dropped to TL 29 billion from TL 31 billion. The total liability amount, which indicates the highest risk that can be taken by loan users, surged to TL 313 billion from TL 266 billion.

A total of 52 percent of the loans that were provided for the financing of projects in June 2016 was given to the energy sector, while 12 percent and 13 percent of them were provided for the infrastructure and real estate sectors, respectively. The remaining 23 percent of the loans was given to other sectors. Loans provided for the energy sector rose to TL 111 billion from TL 98 billion, while loans for the infrastructure sector, which includes giant projects such as roads, bridges, highways and airports, soared to TL 32 billion from TL 15 billion. Loans given to the real estate sector, including hotels, shopping centers, and housing and office projects, increased to TL 53 billion from TL 51 billion.

Kapital FX Research Analyst Enver Erkan said that banks' project financing consists of long-term loans provided for certain investments made with special purposes and that such projects are expected to create significant cash flow in the future. Stressing that a large portion of project financing is provided for the energy sector, followed by real estate and infrastructure projects, respectively, Erkan stated many significant projects have been actualized through the public-private partnership model in the recent period. Referring to public projects such as the Yavuz Sultan Selim Bridge, Osman Gazi Bridge, Istanbul New Airport, Eurasia Tunnel and Gebze-İzmir Highway and renewable energy projects, Erkan said financing provided by banks has an important part in the financing of public-private partnership investments. Public-private partnership is a new-trend business model where public investments are regulated and supervised by the state and actualized by the private sector. When the lack of infrastructure causes public financing to remain inadequate, especially in developing countries, the public-private partnership model removes the financial burden on the state. Erkan said the model has helped the rise of project financing volume in Turkey, adding that the ongoing megaprojects will maintain this trend.

Source: Daily Sabah