Turkey Faces Ticking Time Bomb With Energy Loans of $51 Billion - BLOOMBERG

July 11, 2018, 7:00 AM GMT+3
Ercan Ersoy and Asli Kandemir

• Some power producers earn less than they owe in debt charges
• Lira’s plunge against dollar has driven up foreign-loan costs

Confronted with a plunging lira, Turkey’s central bank last month urged the general public to borrow in the currency in which they are paid. That warning came too late for the country’s energy companies.

Turkish power producers are emerging as one of the biggest risks to the nation’s banks after they plowed billions of dollars into new power generation, distribution projects and deals over the past 15 years. Now, with the lira depreciating faster than they can raise electricity prices, some utilities earn less per year than what they have to repay in foreign-currency loans, according to the Ankara-based Electricity Producers’ Association.

Their predicament highlights the far-reaching impact of the lira’s 68 percent slump against the dollar since the beginning of 2010 as President Recep Tayyip Erdogan moves his country toward authoritarianism. His grip on the country culminated this week with his swearing in for a five-year term as president with enhanced powers and the appointment of his son-in-law to oversee economic policy.