The Asian Infrastructure Investment Bank's (AIIB) has approved a US$200 million loan to the Industrial Development Bank of Turkey (TSKB), backed by a guarantee from the Government of Turkey. The loan will support long-term financing, primarily for renewable energy and energy efficiency projects.

According to the AIIB, the existence of a long-term financing gap for infrastructure in Turkey exposes projects to refinancing or rollover risk, and this funding will help to fill this gap. The investment will also support renewable energy projects that can qualify for the Turkish government's Renewable Energy Support Mechanism (YEKDEM), which promotes private sector participation in the renewable energy sector.

"We are partnering with TSKB for our first on-lending program with a financial intermediary in Turkey because it will help reduce constraints on long-term capital in Turkey's banking sector," says AIIB vice president and chief investment officer, DJ Pandian. "This is well aligned with our mission to promote sustainable infrastructure and mobilize private capital investment in Asia."

The loan will finance renewable energy projects, including solar, hydropower, wind, geothermal, biomass and energy efficiency projects, and, to a lesser extent, finance other infrastructure sectors, such as transport, water management and treatment, power transmission and telecommunications.

This is the AIIB's second investment in Turkey this year, following a previous US$600 million investment in the Tuz Golu Gas Storage Expansion Project.

"This new investment program will primarily support sustainable energy projects in line with Turkey's 2023 goal to alleviate the country's dependency on energy imports, and we also believe TSKB's robust management procedures will ensure the extension of AIIB's loan to renewable energy, energy efficiency and other infrastructure projects is of the highest quality," says AIIB director general for investment operations, Yee Ean Pang.

The loan provided as part of this on-lending facility will comply with TSKB's environmental and social management system, which is materially consistent with AIIB's environmental and social policy and relevant environmental and social standards. TSKB has also developed an environmental risk evaluation tool for an additional level of screening and categorization of sub-projects to ensure strict environmental and social controls.

Elsewhere, on 18 September 2018, the 16th Meeting of the Board of Directors of the New Development Bank (NDB) was held in Shanghai. At the Meeting, the Board approved three infrastructure and sustainable development projects in India and Russia with loans aggregating US$825 million.

The NDB is a multilateral development bank established by Brazil, Russia, India, China and South Africa to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. To fulfill its purpose, NDB supports public or private projects through loans, guarantees, equity participation and other financial instruments.

The NDB will provide a loan of US$350 million to the Government of the Republic of India for Madhya Pradesh Major District Roads Project II. The loan will be used by the government for on-lending to the State Government of Madhya Pradesh for rehabilitating major district roads with a total length of about 2,000 kilometres to improve connectivity of the rural interior with the national and state highway networks.

The NDB will also provide a loan of US$175 million to the Government of the Republic of India for Madhya Pradesh Bridges Project. The objective of the Project is to tackle the weak links of the road network, the bridges of Madhya Pradesh State, to realize the full benefits of upgrading the state highways and major districts roads, through constructing and upgrading about 350 bridges in the State of Madhya Pradesh.

The Board approved a non-sovereign loan of US$300 million to SIBUR Holding in Russia, for environmentally sustainable infrastructure development related to the ZapSibNefteKhim project. NDB will provide financing including reimbursement of expenses for construction of utilities, including water treatment facilities, transport and logistics infrastructure.

The Board approved the establishment of a bond programme of up to 10 billion South African rand in the South Africa Debt Capital Market.

In late August, S&P Global Ratings (S&P) assigned its AA+ long-term and A-1+ short-term issuer credit ratings to NDB. Earlier the same month, Fitch Ratings announced that it had assigned NDB a long-term issuer default rating (IDR) of 'AA+' with a stable outlook and a short-term IDR of 'F1+'.

The ratings will help the NDB raise attractive funding via benchmark offerings on the global bond markets, enhancing its lending capacity to its members.