The Asian Infrastructure Investment Bank (AIIB) is helping Turkey finance Infrastructure for Tomorrow via a US$75 million loan commitment that will contribute to the expansion, rehabilitation and improved efficiency of the electricity distribution network of Osmangazi region, a landlocked area located in the western part of Turkey.

This is AIIB’s first non-sovereign-backed financing to an electricity network concession, and paves the way for future investments in the regulated industries sector. It is also the development bank's first non-sovereign loan denominated in the Turkish lira.  

The loan was signed on March 7 with Osmangazi Elektrik Dagıtım AS (Oedas), the electricity distribution company indirectly wholly-owned by Zorlu Enerji, which is the incumbent operator of the medium- and low-voltage network in five western provinces of Turkey. Oedas services approximately 1.9 million end-users across 125 towns and 1,455 villages.

Proceeds from the financing will support Oedas’s efforts to procure, construct and operate medium- and low-voltage overhead lines, underground lines, transmission connection lines and transformers.

The AIIB loan is part of a US$350 million equivalent club financing that includes the European Bank for Reconstruction and Development, the International Finance Corporation, the Netherlands Development Finance Company (FMO) and Denizbank AS, part of Emirates NBD. The loan is also AIIB’s first co-financing with the IFC and FMO in Turkey.

“The project will contribute to three of AIIB’s thematic priorities, namely green infrastructure, private capital mobilization and technology-enabled infrastructure,” says Supee Teravaninthorn, director general of the Infrastructure Investment Department (Region 2). “We look forward to working with Zorlu Holding and our financing partners in order to contribute to the expansion and digitalization of the electricity distribution network of the Osmangazi region.”

Turkey initiated the liberalization of its electricity distribution sector in 2004 by auctioning the operating rights of 21 distribution regions to private operators. The reforms helped the private sector mobilize substantial capital to expand and modernize the country's distribution networks amid growing electricity demand.

The loan also establishes a new relationship between AIIB and Zorlu Group, an industrial conglomerate that operates across several sectors including textiles, consumer electronics and household appliances, energy, property, mining, metallurgy, financial services, aviation and tourism.