May 2, 2019 / 4:25 PM / 19 days ago

UPDATE 1-Turkey's energy sector has $12-13 bln of problem loans -Garanti Bank executive

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ISTANBUL, May 2 (Reuters) - Turkey’s energy sector has $12-13 billion worth of loans that require restructuring, out of a total of $70 billion, lender Garanti Bank’s deputy managing director Ebru Edin said on Thursday.

Last month, Finance Minister Berat Albayrak unveiled a plan to transfer some of the banking sector’s problem loans to off- balance-sheet funds, two of which were to focus on energy and real estate.

Some debtors will be able to repay loans if terms are eased, “but some of the projects may not be able to repay the debt even if restructured,” Edin told broadcaster Bloomberg HT.

The planned energy sector fund will be managed by a portfolio management company, he said.

Turkey has experienced years of rapid growth fuelled by a construction boom and cheap loans. But the economy has slowed sharply with the impact of a currency crisis that last year wiped 30 percent off the value of the lira against the dollar.

Turkey is almost completely reliant on imports to meet its energy needs, whose cost surged with the plummeting lira, leading to an increase in energy prices for consumers.

Garanti Bank, Turkey’s third largest by asset size, has financed several local energy projects. Some $23 billion of the sector’s total loans have already been paid, Edin said.

Following the establishment of the energy loans fund, all problem companies will become separate funds and the creditors themselves will be shareholders, Edin said.

After the funds reach a certain level of stability, they may become assets that could be sold to investors and in turn relieve banks’ balance sheets, she said.

More than half of the loans were given to renewable energy projects, Edin also said adding that with state-guaranteed energy purchases the problems with these loans were much more limited. (Reporting by Can Sezer and Ebru Tuncay Writing by Ezgi Erkoyun; Editing by Ece Toksabay and John Stonestreet)

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