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Turkish JV wins €650-mil loan to decarbonize light commercial trucks

15 July 2021 Amena Saiyid

Turkey's burgeoning EV industry received a boost 14 July with a €650 million ($767.65 million) loan package to produce a range of all-electric and plug-in hybrid variants of one-ton commercial vehicles.

Ford Otosan, a joint venture of US automaker Ford and Turkish investment holding company Koc Holding, was approved for the loan, which the European Bank for Reconstruction and Development (EBRD), though the lender of record for the full amount, is working with 11 other banks and investors to provide.

The EBRD said the financing package is part of its drive to "fund the green transition and supports Ford's aim of leading the electrification of the automotive industry for a climate-friendly, more sustainable future."

The transportation sector was responsible for 29% of global GHG emissions in 2019.

"Electric vehicles are a promising step towards lowering GHGs from the transport sector, and I am pleased that the EBRD is able to support Turkey in becoming a European hub for commercial EV production, bringing in know-how, creating jobs, and promoting a low-carbon economy," Arvid Tuerkner, EBRD managing director for Turkey, said in a 14 July statement announcing the loan.

New line of electric vehicles

With this loan, Ford Otosan said it will begin to produce diesel, plug-in hybrid electric vehicles, and fully electric versions of the 1-ton Ford Transit Custom at its Gölcük plant in the Turkish province of Kocaeli in the first half of 2023.

For this project, the EBRD will provide €175 million ($206.67 million) from its own coffers, while the remaining €475 million ($560.98 million) will be supplied through the syndicate of banks and investors.

Ford Otosan plans to spend 20.5 billion Turkish Liras (the equivalent of €2 billion, or $2.3 billion) on next-generation commercial vehicle production through 2026, backed by Turkish state incentives.

The Gölcük plant is the only production center for the Transit Custom in the world and is currently producing 180,000 vehicles annually, according to Ford.

The company announced plans in March to increase its 1-ton commercial vehicle production capacity to 405,000 vehicles. This increase in production will reflect an alliance between Ford and German automaker Volkswagen as well as the plug-in hybrid vehicles and all-electric vehicles Ford plans on making.

Job creation

With the investment from the EBRD and the alliance with Volkswagen in place, Ford Otosan said it is set to become Ford's global hub for the production of commercial EVs and create 3,000 new jobs on top of the 7,500 already employed there.

"With this strategic investment, as the country's leading exporter, not only of vehicles but also engineering and technology for many years, we will have the opportunity to work on advanced technologies that will contribute to the national economy and produce more sustainable products for a greener world," said Ford Otosan General Manager Haydar Yenigün in a 14 July statement.

For the Ford Otosan project, the EBRD is using a form of blended financing. Under this approach, the EBRD acts as the lender of record, financing a portion of the loan package, while the remaining debt is provided by a syndicate of commercial banks and qualified private-sector lenders. In this instance, the participating lenders comprise Akbank, Bank of China, BNP Paribas, Emirates NBD Bank (P.J.S.C.), Green for Growth Fund, HSBC, Industrial and Commercial Bank of China, Mediobanca, MUFG, QNB, and Société Générale.

"By acting as lender of record for the full amount of the loan, the EBRD reduces co-lenders' exposure to country risk, making the investment more attractive," IHS Markit CleanTech Research & Analysis Director Conway Irwin told Net-Zero Business Daily.

Blended finance

As the scale of needs for the costs of the energy transition to net zero exceeds what the public sector can finance alone, blended finance (the use of public financing structures to attract private capital) is increasingly viewed as "an efficient and effective means of filling the gap," Irwin wrote in a 13 July analysis, "Road to COP26: Enlisting markets to get to net zero."

The EBRD has invested more than €13 billion in Turkey through 341 projects, with 96% of those in the private sector.

Using the blending finance structure, the EBRD has approved a €135 million ($159.3 million) loan package for the Bursa Hospital project, with EBRD providing €55 million ($64.87 million).

Beyond Turkey, EBRD signed a loan of $65 million for a $93 million, 51-MW solar energy project sponsored by Al-Safawi for Green Energy PSC, a special purpose entity incorporated in Jordan. The Dutch development bank FMO supported the financing as the private sector lender with a participation of $33.3 million.

In Egypt, the EBRD, the Green Climate Fund, the Islamic Development Bank, the Islamic Corporation for the Development of the Private Sector, and FMO are providing loans totaling $335 million for Norwegian developer Scatec Solar and its partners to build an initial portfolio of six 50-MW solar plants at the Benban Complex in Upper Egypt, some 450 kilometers west of Cairo.

However, upon completion, EBRD said "the Benban Complex is projected to become the largest solar installation in Africa, with a planned total capacity of 1.8 GW."

The initial 300-MW solar project is expected to generate 870 GWh/year, reducing CO2 emissions by around 350,000 mt/year.

Posted 15 July 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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