New Energy market report from Business Monitor International: "Turkey Power Report Q1 2014"

Boston, MA -- (SBWire) -- 12/25/2013 --Despite sizeable economic headwinds that have the potential to sap some of Turkey's impressive economic momentum, the power sector continues to attract interest from a host of international companies, as the country moves to position itself as an energy hub in the south-east Mediterranean region. There is also considerable political backing behind the expansion of the power sector, as the government continues to strive for greater energy security and lessens its reliance on its import-heavy thermal electricity generation mix, which has already played a fundamental role in deepening Turkey's current account deficit. As such, with the vast majority of Europe's power markets registering tepid growth, we expect Turkey to emerge as a key regional player in the power sector.

Yet, while the outlook is bright, the development of Turkey's power sector is complicated by the county's precarious economic position. We have made significant revisions to our electricity consumption and generation forecasts, based on a deterioration of the country's economy. Underpinning our macroeconomic projections, we note that a large and widening current account deficit (in part due to the import of fuel for power generation), high inflation and elevated political risk have taken a toll on investor confidence and encouraged caution towards holding lira-denominated debt at a time when demand for emerging market assets is waning, as yields in developed states look set to improve.

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While this has prompted Turkey's central bank to tighten monetary policy so as to reverse capital outflows and ease depreciatory pressures, we believe rates will have to rise further to avert a crisis of investor confidence and attract enough capital to finance external deficits. This will curb fixed investment, credit growth and private consumption, which are the main drivers of economic growth in Turkey. In turn, any subsequent fall in demand will have a deleterious impact on electricity consumption and generation -underscoring our conservative power sector forecasts for generation growth of 5.6% in 2014 (matched by consumption) - considerably lower than in the preceding years.

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