T.R. MINISTRY OF DEVELOPMENT · Model: BLT, Investment Cost: 373 million $, Bed Capacity: 1250, Construction Period: 3 years, Operation Period: 25 years, Contract signed by 2013,

T.R. MINISTRY OF DEVELOPMENT

Public Private PartnershipExperience of Turkey

Sedef Yavuz Noyan (Head of PPP Department)

BANKS FOR GROWTH –TIRANA, NOVEMBER 14, 2017

www.kalkinma.gov.tr

Outline

• Rationale for PPP in Turkey

• PPP Models and Methods

• Turkey’s PPP Experience

• Incentive Mechanisms

• Large Scale PPP Projects

Infrastructure –Development Relation

Infrastructure capacity in developing economies lags significantly

behind that of developed economies

3Source: McKinsey, ‘Infrastructure productivity: How to save a $ 1trillion a year’, 2013.

• According to McKinsey1,

1- McKinsey Global Institute, Bridging Global Infrastructure Gaps, June 2016

Infrastructure Demand

The worldspends $ 2,5 trillionannually

The need is $ 3,5 trillion

(3,8 % of theworld GDP)

for transportation, energy, water and telecommunicationsectors, from 2016 through2030

just to supportexpected rate of growth

Importance of Infrastructure• Increasing the infrastructure investments by 1 % could increase GDP

by 1,2 %2.

• Similarly, increasing infrastructure investment by one percent of GDPcould generate millions of indirect jobs in short term3.

• Low-income countries in Central Africa could add as much as 2,2percent to their annual growth if they had the same level ofinfrastructure as India or Pakistan4.

• Middle-income nations in Latin America could add 2 percentage pointsto annual growth rates if their infrastructure were with that of middle-income nations such as Turkey4.

2- Citi GPS, Infrastructure for Growth: The Dawn of a New Multi-Trillion Dollar Asset Class, 2016.3- McKinsey Global Institute, Bridging Global Infrastructure Gaps, June 2016.4- McKinsey, ‘Infrastructure productivity: How to save a $ 1trillion a year’, 2013.

Turkey’s 10th Development Plan (2014-2018): Investment Strategies

6

Priority areas are:

• education,

• health,

• drinking water and waste

water,

• science and technology,

• transportation

• irrigation sectors.

PPP Investment/Public Investment Ratio

7*Excluding local governments’ investments

0% 1%

5%3%

0%1%

3% 1%

27%

7% 10%

76%

10%

3%

14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PPP Investments / Public Investments*

Turkey’s PPP Market in 2016

8

Turkey ranks third in EuropeanPPP market according to EPEC (European PPP Expertise Center –European Investment Bank-2016)

& Turkey ranks third among 139 countries according to World Bank (between 1990-2015)

Rationale for PPP in Turkey

Complementary and supplementary to limited

conventional financing

Helps to attract foreign direct investment

Enhances the quality,

effectiveness and efficiency of

public services

Facilitates know-how and

technology transfer

PPP Models and Legislation in Turkey

10

Models & Legal Framework & Sectors

Build-Operate-Transfer

Law No3996, 3465 and 3096

Build-Operate

Law No4283

Build-Lease-TransferLaw No

5396,652,6428 and 351

Transfer of Operating RightsLaw No

4046,5335,3465,3096

Motorway Port Airport Marina Border

Gate Power

Plant

Hospital College Dormitory School

ThermalPowerPlant

Airport Port Power

Plant Electricity

distribution

PPPs in Turkey: Existing Legal Framework

Turkey’s PPP Experience

12

Project in

Operation

Project in Financial

Close or Under

Construction

Total

Number of

Projects187 34 221

Project

Investment

Value

20,2 billion $ 39,9 billion $

60,1

billion

$**

Project

ContractValue* 54,5 billion $ 76,9 billion $

131,4

billion

$**

** In 2017 prices*Investment Value+Transfer of Operating Rights Fees paid by the private sector


13

Build-Operate-

Transfer; 105; 48%

Build-Operate; 5;

2%

Build-Lease-

Transfer; 21; 9%

Transfer of

Operating Rights;

90; 41%


Motorways

Number of Projects

221

22

Airports

41

Railway

1IndustrialFacilities

15

Culture and Tourism

1

Marinas 17

Ports

18

Border Gates2

HealthCampuses

21

Energy

83

* 2017 Prices, Billion $


Ports

TotalContract

Value$ 131,4

$ 2,6

Motorways

$ 18,2

Railway

$ 0,25

Border Gates$ 0,43

Culture and Tourism

$ 0,14

Marinas $ 1,7Airports$ 68,8

IndustrialFacilities $ 1,4

HealthCampuses

$ 11,9

Energy

$ 25,9

Bidding Criteria for BOT and BLT Projects

• Operation Period

• Lease Amount (paid by investor to government in BOT projects)

• Lease Amount (paid by government to investor in BLT projects)

• Minimum Demand/Revenue Guarantee

16

Financing Structure in PPP Projects in Turkey

• Minimum equity/credit ratio for PPP projects is 20%/80%

according to legislation,

• For mega projects, 80 % credit becomes most common practice.

17

Incentive Mechanisms for PPP in Turkey

Shadow toll or revenue guarantees,

Assumption of Debt by Treasury provided:

BOTs must have minimum 1 billion TL

(app. 285 million $) investment

BLTs must have minimum 500 million TL

(app. 145 million $) investment

Incentive Mechanisms for PPP in Turkey

«Step-i » right for the creditors,

Exemption from VAT, stamp duty and charges,

Fee-free use of state-owned immovable assets and

expropriation,

International arbitration allowed.

Large Scale Projects in Operation

North Marmara Motorway Project (Including 3rd Bosphorus Bridge)

Yavuz Sultan Selim Bridge (3rd Bosphorus Bridge) part opened on 26th August 2016, the rest in 2017 .

The longest suspension bridge with railway and the widest span

21* In 2017 prices


22

MAHMUTBEY

ODAYERİ

POYRAZKÖY

REŞADİYE

PAŞAKÖY

ÇAMLIK

GARİPÇE

SULTANBEYLİ

RİVA

HÜSEYİNLİ

USKUMRUKÖY

IŞIKLAR

3.AIRPORT

SABİHA GÖKÇEN AIRPORT

ATATÜRK AIRPORT

BAŞAKŞEHİR


Model: BOT,

Investment cost : 3 billion $,

Capacity: 102 km motorway (including the bridge),

158 km in total

Construction period: 2,5 years,

Operation time: 7 years 8 months (bidding critera),

23* In 2017 prices

Eurasia Tunnel

Model: BOT

Investment cost $1,4 billion

Capacity: 5,500 m tunnel, 20 k ’s in total

Construction Period : 4,5 years; in operation by 2016,

Operation Period: 24,5 years (bidding criteria).

24* In 2017 prices

Gebze-Orhangazi-İzmir Motorway

Model: BOT,

Investment cost: $ 7 billion,

Capacity: 433 km motorway,

Includes Osmangazi Bridge

Connects İsta ul to İz ir (two production and

consumption centers)

Operation period: 15 years 4 months

110 km part of the motorway (including the 2,6 km

Osmangazi Bridge) is in operation.

25* In 2017 prices

Health Campuses

26

There are totally 29 PPP (BLT) projects which are authorized by theHigh Planning Council,

The 21 of 29 projects’ contracts are signed,16 are financially closed.

Total bed capacity is 37.741 for authorized 29 PPP projects.

.

27

Mersin Health Campus

Model: BLT,

Investment Cost: 373 million $,

Bed Capacity: 1250,

Construction Period: 3 years,

Operation Period: 25 years,

Contract signed by 2013,

In Operation by 2017

Bid Evaluation Criteria: The lowest lease amount.

* In 2017 prices

.

28

Adana Health Campus

Model: BLT,


Bed Capacity: 1550,




In Operation by 2017,


* In 2017 prices

.

29

Yozgat Health Campus

Model: BLT,


Bed Capacity: 475,




In Operation by 2017,


* In 2017 prices

.

30

Isparta Health Campus

Model: BLT,


Bed Capacity: 755,




In operation by 2017,


* In 2017 prices

Large Scale Projects in Construction

İstanbul New Airport

32* In 2017 prices

One of the biggest airports in the world by means of passenger capacity,

Model: BOT

Investment cost: $ 14,4 billion,

4 phases, 1st in operation by 2018

Final Capacity:

150 million passenger capacity

4 terminal building

6 runway

16 taxiway

Construction period: first phase 42 months

Operation period: 25 years

Lease amount: $ 36,9 billion (inc. VAT) (bidding criteria) 1,5 billion lease/year

33

17 Health Campuses: e.g. Ankara Bilkent HealthCampus

Model: BLT

Investment Cost: 1,2 billion $

Bed Capacity: 3662

Construction Period: 3,5 years,




* In 2017 prices

Large Scale Projects Tendered and Looking forFinance

35* In 2017 prices

MOTORWAY PROJECTS*

Kı alı-Tekirdağ-Ça akkale Motorway project (Malkara Section)

(Investment cost: $ 2,9 billion, Capacity: 324 km motorway,)

Menemen-Aliağa-Ça darlı Motorway Project

(Investment cost: $ 395 million, Capacity: 75,6 km motorway)

North Marmara Motorway Proje t /Kurtköy Akyazı Section

(Investment cost: 1,6 billion USD, Capacity: 169 km motorway)

North Marmara Motorway Proje t/Kı alı-Odayeri Section

(Investment cost: 940 million $,Capacity: 88 km motorway)

Ankara-Niğde Motorway Project

(Investment cost : 1,14 billion $,Capacity: 330 km motorway)

Health Campuses

Model: BLT,

Health Campuses searching for finance:

Kütahya, Şa lıurfa, Tekirdağ Health Campuses,

Total Capacity: 2.780 beds,

Total Invetsment Cost : 818 million $,

Operation period 25 years,


36* In 2017 prices

Project Pipeline

6,5 Billion USD projects in short-term pipeline

(mostly motorways),

New logistics centers, port projects, railway projects,

irrigation projects and urban infrastructure projects

are expected to come in mid-term pipeline.

37

Lessons Learned for a Successful PPP

38

On private sector side:

o Political stability and political will to implement PPPs,

o Good regulatory environment, where rule of law is valid,

o Macroeconomic stability of the country,

o Reliable dispute resolution mechanisms,

o Good capacity in governmental organizations.


39

On public sector side:

o Understanding what a PPP project means (Not carryingout a project free of charge or realizing the projectimmediately).

o Prioritizing the projects in the means of project value andsectoral importance and choosing the right project.

40

o Preparing a proper feasibility study (including technical,financial and judicial analysis).

o Economic feasibility is a must!

o Preparing a value for money analysis.

o Allocating risks properly between public and privatepartners.

o Estimating the liabilities (debt assumption, revenue anddemand guarantees etc.)


41

o Coordinating all public institutions related with theproject.

o Planning the bidding process properly.

o Implementing the contract management properly.

o Using technical consultancy when needed.

o Taking the financial market into consideration.


42

o Implementing a transparent performance evaluation andinspection

o Reinforcing project monitoring and evaluation structure.

o Creating a systematic information flow from lineinstitutions to PPP Unit.

o Creating an auditing mechanism on PPP projects (inaddition to the line institutions’ own mechanism).


43

PPP is a useful tool


IF

IS DONE

PROPERLY

RISK ALLOCATION

CONTRACT MANAGEMENT

COORDINATION AND PLANNING

Thank You

Thank you…

T.R. MINISTRY OF DEVELOPMENT · Model: BLT, Investment Cost: 373 million $, Bed Capacity: 1250, Construction Period: 3 years, Operation Period: 25 years, Contract signed by 2013,

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