Emre AYKAR President – CICA (Confederation of International Contractors’ Association), Vice President – TCA (Turkish Contractors’ Association) Partner, Member of the Board – Yapı Merkezi TURKISH PPP EXPERIENCE And A Milestone Project: Istanbul Strait Road Tube Crossing September 2, 2015 – Kuwait City
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Emre AYKARPresident – CICA (Confederation of International Contractors’ Association),
Vice President – TCA (Turkish Contractors’ Association)
Partner, Member of the Board – Yapı Merkezi
TURKISH PPP EXPERIENCEAnd
A Milestone Project:
Istanbul Strait Road Tube Crossing
September 2, 2015 – Kuwait City
Contents
Turkish PPP Experience
1. A General Outlook to Turkish PPP Experience with Reference to
Major Ongoing PPP Projects
2. Presentation of Istanbul Strait Road Tube Crossing (The Eurasia
Tunnel) Project
3. Final Remarks
September 2, 2015 – Kuwait City
September 2, 2015 – Kuwait City
How to transform a desirable project on a government wish list
Main Idea of the Presentation
to an attractive investment opportunity for potential private sector partner?
A General Outlook to Turkish PPP Experience
with Reference to Major Ongoing
PPP Projects
September 2, 2015 – Kuwait City
September 2, 2015 – Kuwait City
A General Outlook to Turkish PPP Experience
Population 76,9 Mil.
Annual Pop. Growth 1,3%
GDP USD 800 Bil.
GDP Growth Rate 2,9%
GDP Per Capita USD 10.404
Unemployment Rate 9,48%
Inflation Rate 8,17%
Exports USD 157,6 Bil.
Imports USD 242,2 Bil.
Current Account (% of GDP) -5,7%
Public Debt (% of GDP) 33,1%
Foreign Direct Investment USD 12,5 Bil.
Number of Tourists 37 Mil.
Macroeconomic Outlook of Turkey in 2014
September 2, 2015 – Kuwait City
Vast Investment Needs
Transportation Energy Education
Healthcare Defense Housing
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
8,40
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GDP Growth and GDP per capita in Turkey
GDP Growth Rate (%) GDP Per Capita ($)
GDP Growth and GDP Per Capita in Turkey
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Turkey’s Fiscal Position is Supportive
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A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
But Fiscal Space Has Its Limits
• Public investment is limited by budgetary resources
• Or limited by a politically painful set of options:
Raise taxes
Cut Spending
Borrowing
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Turkish Government Has a Positive Approach for PPP’s• Financial BenefitsSubstantial Increase in FDI levels Efficient utilization of International Bank and Capital Markets
• Macroeconomical BenefitsCreating new focused sectors /higher employment and new brand names
• Central Budget BenefitsEasing the financial burden in central budget (Off-balance sheet)Thus improving sovereign debt and credit ratings
• Fair share / usage of infrastructuresProjects are funded / paid for by the real end-users
• Feasibility / Project Realization BenefitsThe Government can focus, assign and direct funds to other more social projectsNo cost overruns / No time overruns / higher service life quality)
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
PPP Implementation in Turkey
PPP Model Sectors Involved
Build-Operate-Transfer Energy, Airports, Ports
Transfer of Operating Rights Energy (HEPP), Highways, Bridges, Ports
Build-Lease-Transfer Healthcare
Build-Operate (At the begining
years of PPP Implementation)Energy
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
PPP Implementation in Turkey
Project in Operation Project in Financial
Close/Construction
Total
Project Number153 30 183
Project ValueUSD 40 bln USD 62 bln USD 102 bln
Some of the Main PPP Types Qty. Sectors Involved
Build-Operate-Transfer 98 Energy, Airports, Ports
Transfer of Operating Rights 69 Energy (HEPP), Highways, Bridges, Ports
Build-Lease-Transfer 11 Healthcare
Other 5 Various
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
PPP Implementation in Turkey
Projects Project Value
Energy USD 21.5 Bil.
Airports USD 56.6 Bil.
Motorways USD 11.5 Bil.
Harbor USD 2.0 Bil.
Marina USD 1.6 Bil.
Healthcare Facilities USD 6.8 Bil.
Industrial Facilities USD 1.3 Bil.
Bordergate USD 0.4 Bil.
Railway USD 0.2 Bil
Total USD 102 Bil.
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
The Most Succesful PPP Implementation by Sector: Aviation• The number of airports in 2002 was 26. In
2013 this number reached 53
• Out of the 27 newly-built airports, 17 are currently involved in a PPP scheme
• 11 of these airports’ are being realized under a BOT structure and another 6 airports’ operating rights are transferred to Private Sector.
• In 2013, out of the total passengers travelling to domestic destinations 71% travelled through airports operated by Private sector under PPP schemes. The same ratio is 97% for passengers flying international destinations
2013
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Major Ongoing PPP Projects in Turkey
The 3rd Bosphorus Bridge and the Northern Marmara Motorway
Project
Istanbul 3rd Airport
Gebze-Orhangazi-İzmir Motorway Project (Incl. Izmit Bay Crossing and
Approach Roads)
Bilkent Integrated Health Campus Project
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
The 3rd Bosphorus Bridge
A General Outlook to Turkish PPP Experience
• Client: General Directorate of Highways
• Investors: IC İçtaş – Astaldi Consortium
• Scope: Construction of the 3rd Bosphorus Bridge (1,408m) and 115km motorway. The bridge
will have 8 lanes of motorway and 2 lanes of railway at the same level
September 2, 2015 – Kuwait City
The 3rd Bosphorus Bridge
• Total Investment Cost: USD 2,5bln
• Construction Period: 3 Years
• Operation Period: 7 Years and 2 Months
o Minimum Revenue Guarantee
o Freight Transportation (Rail + Road) willbe diverted out of the city limits
o To be the longest spanning suspensionbridge in the world that has a railsystem on it
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Istanbul 3rd Airport
• Client: Ministry of Transport, Maritime and Communications• Investors: Cengiz-Kolin-Limak-MAPA-Kalyon Consortium• Scope: Project total area of 76,500,000m2 (6 runways, 6 taxiways, high-
speed and connection taxiways, Air traffic, Communications andmeteorology systems, other service buildings and systems)
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Istanbul 3rd Airport
• Total Investment Cost: EUR 9 bln
• Contract Value: EUR 22 bln (excl. VAT)
• Construction Period: 5 Years
• Operation Period: 25 Years
Notes:
o The project is to be completed in severalphases
o At completion the airport’s capacity willbe sufficient to service 150,000,000 passengers per year
o Istanbul to become a regional andinternational hub for air passenger traffic
o PPP structure is based on manysuccesfully completed airportconcessions in Turkey’s past.
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
Gebze - Orhangazi - Izmir Highway• Client: General Directorate of Highways
• Scope: The project has total 427km length consisting of 384km motorwayand 43km connection roads; Including a suspension bridge (İzmit Bay CrossingBridge) of about 2,6km in length
A General Outlook to Turkish PPP Experience
September 2, 2015 – Kuwait City
A General Outlook toTurkish PPP Experince
Gebze - Orhangazi - Izmir Highway
• Total Investment Cost: EUR 10bln• Construction Period: 7 Years• Operation Period: 15 Years 4 Months• Notes:
o The project will reduce travel time from Istanbul to İzmir, two of the main economic centers in Turkey, from 10 hours to 4 hours
o The area across which the projectstretches has one third of Turkey’spopulation and includes the seven most industrialized cities contributingto 45% of GDP
September 2, 2015 – Kuwait City
A General Outlook toTurkish PPP Experince
Bilkent Integrated Health Campus
Client: General Directorate of Health InvestmentsInvestors: IC İçtaş – Dia Holding fzco Joint VentureScope: To design, build, finance, maintain and transfer a hospital with a capacity of 3,804
beds. The total area is approx. 1,2M sqm. The project company will provide thefacilities management services and other clinical and non-clinical support servicesover the course of the operating period.
September 2, 2015 – Kuwait City
A General Outlook toTurkish PPP Experince
Bilkent Integrated Health Campus
• Total Investment Cost: USD 850M
• Construction Period: 42 Months
• Operation Period: 25 Years
• Notes:
– Renumeration in availability payments
– Strong support from Multilateral Banksand International Finance Institutions
Presentation of a Milestone Project:
Istanbul Strait Road Tube Crossing
(The Eurasia Tunnel)
September 2, 2015 – Kuwait City
September 2, 2015 – Kuwait City
Location
Eurasia Tunnel
September 2, 2015 – Kuwait City
Current Traffic Situation on the Strait Crossings (Bosphorus Bridges)
Eurasia Tunnel
Bosphorus Bridge - (1st Bridge) Fatih Sultan Mehmet Bridge - (2nd Bridge)
September 2, 2015 – Kuwait City
Scope
Eurasia Tunnel
• Providing continuousflow of traffic betweenAsian and European Side of Istanbul in a safe, robust and comfortablefashion.
• Significant time savings
• Shortest path between Atatürk and Sabiha Gökçen airports
• No effect on the “Silhouette of Istanbul”
• Net savings in pollutant emissions with reducedtravel time – An Environmental FiendlyProject
September 2, 2015 – Kuwait City
Scope
PART 1 PART 2 PART 3
Out of the total 14,6 km Project alignment, underground section (Part 2) section is 5,4 km. TBM section crossing the Bosphorus is 3,4 km while another 2,0 km is constructed using NATM and cut-cover methods. Parts 1 and 3 will be handed over to the Istanbul Metropolitan Municipality and Part 2 will be operated by ATAŞ.
Eurasia Tunnel
September 2, 2015 – Kuwait City
Parties
Eurasia Tunnel
Administration: T.C. Ulaştırma, Denizcilik ve Haberleşme Bakanlığı
(Ministry of Transportation, Maritime and Communication)
Altyapı Yatırımları Genel Müdürlüğü
(General Directorate of Infrastructure Investments)
Project Company: Avrasya Tüneli İşletme, İnşaat ve Yatırım
(Eurasia Tunnel Operation, Construction and Investment Inc.)
EPC Contractor: Yapı Merkezi, SK EC Joint Venture
September 2, 2015 – Kuwait City
Eurasia Tunnel
Contractual Framework
Concession
Agreement, Minimum Revenue
Guarantee
Sponsors
Administration, Ministry of Transport
ImplementationContract Direct
Agreement
DebtAssumptionAgreement
September 2, 2015 – Kuwait City
Eurasia Tunnel
Chronology
September 2, 2015 – Kuwait City
Eurasia Tunnel
Project Sponsors – Yapı Merkezi
Dubai Metro
Haramain High Speed Railway Madinah station
September 2, 2015 – Kuwait City
Eurasia Tunnel
Ethiopia Awash – Kombolcha – Hara Gebaya R.
Four Seasons Hotel Ankara Konya High Speed Railway
Project Sponsors – Yapı Merkezi
September 2, 2015 – Kuwait City
Eurasia Tunnel
Algeria Bir Touta – Zeralda Railway
Casablanca Tramway QATAR METRO
Project Sponsors – Yapı Merkezi
September 2, 2015 – Kuwait City
Eurasia Tunnel
Project Sponsors – SK E&C
Kapsarc R&C Complex, S. ArabiaSK Telecok T-Tower, Seul Korea
RPMAA Rafinery Complex, Kuweit
September 2, 2015 – Kuwait City
Eurasia Tunnel
Project Sponsors – SK E&C
Yeosu Crude Oil Underground Storage, Korea S Trenue Tower, Seul Korea
• Strait was formed by historic tectonic forces, leaving the Trakya Sandstone bedrock folded,
faulted, intruded, intensely fractured and weathered.
• Soft ground is alluvial deposits that have in-filled a past channel in the bedrock. Alluvial deposits
range from coarse-grained soils (gravels and sands) to fine-grained soils (silts and clays) and can
vary both vertically and laterally as a result of depositional history. TBM tunnel passes through
mostly silty fine sand and some clay and sandy clay layers.
September 2, 2015 – Kuwait City
Eurasia Tunnel
Seismic Provisions
Seismic Couplings
European SideAsian Side
Due to potential differential movement of rock mass and soft soils seismic connections are provided in the transition zones. These special connections provide for elastic behavior up to 70 mm of differential movement.
European portal area is elevated from sea level to provide for potential Tsunami waves.
September 2, 2015 – Kuwait City
Eurasia Tunnel
Assembly of the Tunnel Boring Machine
September 2, 2015 – Kuwait City
Eurasia Tunnel
Assembly of the Tunnel Boring Machine
September 2, 2015 – Kuwait City
Eurasia Tunnel
Excavation Pit
September 2, 2015 – Kuwait City
Eurasia Tunnel
Tunnel Boring Machine at Work
September 2, 2015 – Kuwait City
Eurasia Tunnel
Segment Stock and Delivering
September 2, 2015 – Kuwait City
Eurasia Tunnel
Prior to Deck Construction
September 2, 2015 – Kuwait City
Eurasia Tunnel
Upper – Deck Formwork
September 2, 2015 – Kuwait City
Eurasia Tunnel
After Deck Construction
September 2, 2015 – Kuwait City
Eurasia Tunnel
Deck
September 2, 2015 – Kuwait City
Eurasia Tunnel
Road Widening
September 2, 2015 – Kuwait City
Eurasia Tunnel
Crossing
September 2, 2015 – Kuwait City
Eurasia Tunnel
ATB
September 2, 2015 – Kuwait City
Eurasia Tunnel
ETB
September 2, 2015 – Kuwait City
Eurasia Tunnel
NATM Tunnels
September 2, 2015 – Kuwait City
Eurasia Tunnel
Excavation Ceremony
September 2, 2015 – Kuwait City
Eurasia Tunnel
Breakthrough Ceremony
September 2, 2015 – Kuwait City
Eurasia Tunnel
Breakthrough Ceremony
September 2, 2015 – Kuwait City
Eurasia Tunnel
Item Cost (USD)
EPC Costs: 814,000,000
Development and Admin: 115,000,000
Financial Costs: 81,000,000
Interest During Investment: 178,000,000
Reserves and Contingency: 57,000,000
TOTAL INVESTMENT COST 1,245,000,000
Equity (22.9%) 285,000,000
Senior Loans (77.1%) 960,000,000
Investment Summary
September 2, 2015 – Kuwait City
Eurasia Tunnel
Investment Summary
Type of Facility Amount Extended(USD)
All facilities’ terms are 18 years
Direct Facilities (EIB, EBRD, KEXIM): 550,000,000
Facilities under Export Insurances: 210,000,000
Facilities Guaranteed by Turkish
Banks (funded by EIB):
200,000,000
Total Credits: 960,000,000
September 2, 2015 – Kuwait City
Eurasia Tunnel
Financial Institutions Involved
Multilateral Institutions: European Investment Bank
European Bank for Reconstruction and Development
Export Insurance Providers: Korean Exim Bank
Korean Export Insurance Agency (K-Sure)
Commercial Banks: Standard Chartered Bank
Sumitomo Mitsui Banking Corporation
Mizuho Bank
Garanti Bankası
Türkiye İş Bankası
Yapı Kredi Bankası
Deutsche Bank
September 2, 2015 – Kuwait City
Eurasia Tunnel
Legal Framework Development
Development and updating of City Plans Approvals from Protection Councils and other authorities
Creation of City Plans
Updating of Existing City Plans by Municipalities
Development of Debt Assumption Agreement(between Lenders and Turkish Treasury)
Development of Direct Agreement(between Lenders and Ministry of Transportation)
Development of Cooperation Protocol
(between Ministry of Transportation, Istanbul Metropolitan Municipality,
Turkish National Police and Turkish Highway Authority)
September 2, 2015 – Kuwait City
Eurasia Tunnel
International Project Financing Awards
Euromoney – Europe’s Best Project Finance Deal
EMEAFinance – Best PPP Project Deal
Infrastructure Journal – Best Innovative Deal
Thomson Reuters PFI – Best Infrastructure Deal
EBRD Annual Mtg 2015– Environmental & Social Best Practice Award
September 2, 2015 – Kuwait City
Eurasia Tunnel
Eurasia Tunnel Highligts
Eurasia Tunnel PPP Project is a succesful pioneer and milestone project for Turkey;
• Succesful implementation of new regulations for the first time such as; Step-in Mechanism,
Debt Assumption, Risk Events, Direct Agreements, MRG
• Longest tenor and preferential terms for loans
• Increased FDI and support from multilaterals after 2008 Financial Crisis
• Technically challenging project connecting two continents, involving many reputable
international stakeholders
• Reached Financial Closing with full support of the Government
September 2, 2015 – Kuwait City
Eurasia Tunnel
Final Remarks
September 2, 2015 – Kuwait City
Final Remarks
Final Remarks - Turkey
• In Turkey, the succcesful experience and know-how gained through previouslycompleted PPP projects have contributed to the current mature PPP sector with solidlegal, administrative and financial framework.
• Well-prepared projects, with increased bankability as a result of the administrative, legislative and structural support from the Turkish Government, are attracting local andinternational Investors to Turkish Infrastructure PPP Market.
• Since the first succesful implementations of PPP’s in Turkey, this framework has been andwill continue to be, the solution for ensuring succesful financing of infrastructureinvestments in Turkey and further support Turkey’s developmental goals.
• Over the last decade Turkey’s robust PPP market has been able to grasp this direct investment opportunity and used this opportunity as a tool to finance its developmental goals by implementing many PPP projects.
September 2, 2015 – Kuwait City
Final Remarks
Final Remarks – Global Outlook
• Until 2030, a total financing of 57 trillion USD will be needed for various infrastructureinvestments around the world. The total world GDP is around 77 trillion USD whereas the total sovereign infrastructure investments are only appr. % 4 of this amount (around 3 trillion USD)
• With such huge infrastructure investment needs and insufficient sovereign funds, the Private
Sector has to increase its participation in the global infrastructure investments.
• Private Sector’s involvement has also a huge relieving effect on the already debt-heavy sovereignbalance sheets; there is always a substantial private equity investment and some PPP’s are even
structured «user focused / fair» so that the investments are paid by the real «end-users» as opposed to sovereign borrowing where all tax-payers have to contribute for such an investment.
• Currently there is a global understanding that, the heavily debted public finances have triggered a
worldwide influx of Private Capital Investments. The Private Investment Capital that has been
steadily accumulating over the years, is now ready to invest in feasible projects for long-term,
low-risk, inflation-protected returns that are better insulated against economic cycles.
• Institutions like International PPP Center of Excellence under UNECE’s leadership are perfectknowledge and training centers to identify and manage all aspects of well-prepared infrastructureprojects and they also ensure succesful implementation of Global Developmental Goals through PPP projects.