World Bank approves $290m funding for geothermal development in Turkey
Istanbul, Turkey (source: flickr/ John Virgolin, creative commons)
Alexander Richter
2 Nov 2016
The World Bank has approved a $290 million funding package for geothermal development in Turkey to encourage private sector investment into development of projects.
The World Bank has approved a new $290 million funding package for the Geothermal Development Project of the bank in Turkey.
The funding is put together through an International Bank for Reconstruction and Development (IBRD) loan of $250 million and a grant of $39.8 million through the Clean Technology Fund.
Geothermal Development Project in Turkey which will help create renewable energy by tapping heat sources deep in the ground. It aims to encourage private sector investment in geothermal energy development in Turkey by reducing risks for investors through a Risk Sharing Mechanism (RSM) and by providing access to long term financing.
This was announced by the bank in a statement yesterday. The funding is aimed at encouraging private sector investment in geothermal energy development by reducing risk for investors through a risk sharing mechanism and by providing access to long term financing.
The establishment of a risk sharing mechanism will be formed for resource validation to support the exploration and test drilling stages and to set up of a loan facility for resource development that will support power plants’ development phases.
Johannes Zutt, World Bank Country Director for Turkey, said the World Bank was pleased to help the Government of Turkey to expand geothermal capacity in the country. “Increasing renewable energy generation capacity is critical to achieving energy security and climate change mitigation in Turkey. The renewable energy sector has been growing rapidly in Turkey over the past decades, and geothermal power plants, which use subterranean heat to drive electricity-generating turbines, can provide low-carbon baseload power to drive economic growth and boost prosperity.”
The project includes: Establishment of a Risk Sharing Mechanism for Resource Validation, to support the exploration and test drilling stages; and Setting up of a Loan Facility for Resource Development that will support the power plant development phase.
Türkiye Kalkinma Bankasi A.? (TKB) (Development Bank of Turkey) and Türkiye Sinai Kalkinma Bankasi A.? (TSKB) (Industrial Development Bank of Turkey) will be the two financial intermediaries (FI) implementing the project. These banks will benefit from two IBRD loans (US$100 million to TKB and US$150 million to TSKB), which will be co-financed with their own resources. Financing with a long maturity period and capacity building for the participating financial intermediaries is expected to incentivize them to take more risk at earlier development stages than under usual market conditions.
The lending instrument for the Geothermal Development Project is a Variable Spread Loan. TSKB’s variable spread loan has a final maturity of twenty-eight years including a grace period of seven years. TKB’s variable spread loan has a final maturity of twenty-five years including a grace period of ten years.
