Turkey’s energy sector has problem loans of $12-13 billion – executive

Turkey’s energy industry has loans that require restructuring of $12-13 billion, said Ebru Edin, deputy managing director of Turkish listed bank Garanti.

The loans at risk compare with total lending to the industry of $70 billion, Edin told BloombergHT television on Thursday.

While some companies will be able to meet their obligations should loan terms be eased, “some of the projects may not be able to repay the debt even if restructured,” Edin said.

Turkey’s government has turned a plan to transfer problem loans off banks’ balance sheets into a centre-piece of a latest economic programme designed to lift the economy out of recession following a currency crisis last year.

The lira dropped 28 percent against the dollar in 2018 and has lost more than 10 percent of its value this year, making the foreign currency-denominated debt more difficult to repay. At the same time, the government has sought to curb energy prices, squeezing energy companies’ profits further. Most of the money was borrowed from local banks.

Treasury and Finance Minister Berat Albayrak, who served as energy minister until July last year, has said a fund for the energy and real estate industries will be set up and managed by a portfolio management company, which will securitise the debt transferred from banks.

Edin said all problem companies will be turned into separate funds and the lenders themselves will become shareholders.

Turkey is injecting capital into state-run banks and Albayrak says other banks will bolster their finances if required by increasing their capital buffers.