World Bank supports geothermal energy development in Turkey

The World Bank supports Turkey with USD 289.8 million to encourage private sector investment in geothermal energy development.

Geothermal energy projects in Turkey will be supported with an IBRD loan of USD 250 million and a Clean Technology Fund grant of USD 39.8 million, reported Anadolu Agency.

The World Bank’s Board of Directors approved a loan and a grant which aim to encourage private sector investment in geothermal energy development in Turkey. According to the World Bank, such projects will reduce risks for investors through a risk sharing mechanism (RSM) and they will provide access to long-term financing.

An RSM will be formed to support the exploration and test drilling in early stages by sharing the risk of failing for resource validation. Setting up a loan facility, which will address the financing gap in the resource development stages, will enable supporting of the power plants’ development through phases.

“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 power to drive economic growth and boost prosperity,” World Bank Country Director for Turkey Johannes Zutt emphasised.

Long maturity period and capacity building

The financial intermediaries which will implement these projects are Development Bank of Turkey (TKB) and the Industrial Development Bank of Turkey (TSKB). IBRD will transfer USD 100 million to TKB and USD 150 million to TSKB. These loans will be co-financed with Turkish Banks’ own resources.

TSKB will offer a flexible loan with a variable spread and a final maturity of 28 years including a grace period of seven years, while a TKB’s variable spread loan has a final maturity of 25 years including a grace period of 10 years.

Such an arrangement with a long maturity period and capacity building for the participating financial intermediaries is expected to incentivise private sector to take more risk in earlier development stages than under usual market conditions, the World Bank stated.