Aslı Erden Öztürk

Principal Banker

EBRD

Project Financing for

Infrastructure/PPP Projects in Turkey

Investing in Turkey and the Growing Economy

London, 18 March 2015

© European Bank for Reconstruction and Development 2014 | www.ebrd.com

AAA/Aaa rated multilateral development

bank, promotes transition to market

economies in 35 countries from central

Europe to central Asia and the Southern

and Eastern Mediterranean – SEMED

region)

In 2014, the EBRD welcomed Cyprus and

Libya as a recipient country and member

respectively.

• Owned by 65* countries and two inter-

governmental institutions.

• Capital base of €30 billion.

• Invested over €95 billion in more than

4,000 projects since 1991

*Libya is yet to become a fully ratified member of the EBRD

• Results in 2014:

• €8.85 billion invested in 377 projects

• Private sector accounted for 70% share

The EBRD snapshot

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Cumulative business volume of €95bn

The EBRD has been investing in

Turkey since 2009 and today, in

terms of annual business volume,

Turkey has become the largest

country of EBRD operations.

In 2014 the EBRD invested more

than € 1.5 billion for 40+ projects in

Turkey.

As of today, total number of

projects reached 136 with a

portfolio more than € 4billion.

In the resident offices in Istanbul,

Ankara and Gaziantep EBRD

employs 35 professional bankers.

EBRD in Turkey

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Our operational priorities in Turkey:

developing sustainable energy (including support to on-going

reforms of the energy sector through policy dialogue);

promoting the development of micro, small and medium

enterprises (MSMEs);

enhancing the competitiveness of Turkish industry;

promoting market approaches toward investment in infrastructure;

support the Turkish government’s privatisation programme in the

enterprise and financial institutions sector.

Operational Priorities in Turkey

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How we deliver results ?

Development of

strong institutional

and regulatory

frameworks

Donor funded

technical

cooperation to

overcome barriers

and facilitate

implementation

Projects &

Investments

Policy

DialogueTechnical

Cooperation

Wide range of

financing instruments

for public and private

clients

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Strong, internationally recognized partner

Higher risk appetite than other lenders

Long established policy dialogue with Government and

Regulators

Unparalleled presence in the region provides mitigation of

political and regulatory risks.

Preferred creditor status in all countries of operations.

Catalysts to access additional finance

Flexible deal structures and products

Dedicated team with expertise in a variety of sectors and

countries

Donor-funded technical assistance to develop projects

EBRD’s Value-Added: a unique offering

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Wide experience in PPP structures

Assistance to public/authorities:

Provide general advice on acceptable process.

EBRD Policy for Concessions.

Facilitate grant funded technical assistance.

Development of regulatory structures/PPP framework.

Help in preparation of the competitive tendering, projects.

Structuring the financing:

Debt

Equity

Commercial loan co-financing

Environmental, social, health and safety improvement of projects.

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Extensive offer of tailored financial products

Debt Equity

Loans to the private sector (up to 35%

syndicating the rest), including SME

Sovereign, sovereign guaranteed and

loans to state owned companies

Debt co-financing, working with

commercial banks and IFIs

Project finance loans (incl. PPP)

Hard/local currency. Fixed/floating rates

Syndication under preferred creditor status

Access to capital markets

Investing with majority sponsor to

reduce equity burden and add

partnership value. Typically 20-25%

Common or preferred stock

Privatization and initial public offering

(IPO)

Mezzanine equity and subordinated

debt

Infrastructure funds

PPP

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EBRD-participated PPP Projects in Infrastructure in

Turkey

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PPP Loan Loan EBRD Tenor

Year Project Type Type Amount (m) Amount (m)

2014 Adana Hospital PPP DBFMO Senior Loan € 440 € 115 18 year

B-Loan cover € 100

2014 Dalaman Airport TOR Senior Loan € 175 € 87.3 16 year

2013 Mersin International Port TOR Project Bond $450 $80 7 year

2013 Asyaport Greenfield, Senior Loan $267 $92 10 year

concession on land

2012 TAV Izmir Airport TOR Senior Loan € 250 € 70 15 year

B-Loan cover € 75 15 year

2012 Eurasia Tunnel BOT Senior Loan $960 $150 18 year

2011 Privatisation of IDO Share sale, Senior Loan $650 $150 12 year

TOR on lines and piers

2010 TASK- Dilovasi Waste Water BOT Senior Loan € 13.5 € 13.5 10 year

2010 TASK- Gulluk Water BOT Senior Loan € 2.5 € 2.5 10 year

€ 2,940 € 881Total (million €)

EBRD-participated other Infrastructure Projects in Turkey

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Arkas, Senior Corporate Loan, EUR 21.4 million, 2010;

Bursa Light Rail, Municipal Loan, EUR 70 million, 2011;

Bodrum Water, Municipal Loan, EUR 7.5 million, 2011;

Gaziantep CNG Buses, Municipal Loan ,EUR 10 million,

2011;

Mersin Wastewater, Municipal Loan, EUR 20 million, 2012;

ER Denizcilik, Senior Corporate Loan, USD 39.3 million,

2012;

Izmir Ferries, Municipal Loan, EUR 33 million, 2013;

Republic of Turkey - Plans for Infrastructure

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EUR 200 – 400 bn in infrastructure investments over the next 10 years;

Examples of infrastructure requirements:

•EUR 12 billion hospital facilities PPP programme: up to 30 projects

tendered in 2 Phases; Phase 1 including 16 hospitals and EUR 6 billion

investment already awarded

•USD 11 billion rail network expansion over next 3 years and USD 45

billion by 2023

•Extension of dual carriageways to 36,000 km by 2023 ( 22,000km in

2012) (Expected cost of USD 80billion)

•USD 6 billion highway to Izmir; Izmit Bay Crossing

Turkey’s Plans for Infrastructure- Con’t

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• Istanbul airport.

• High speed train Istanbul to Ankara

• North Marmara Highway

• PLUS: urban regeneration plan

Hospital Facilities Management PPP projects

currently mandated

The EBRD Board has pre-approved a financing framework of

Euro 600m for Turkey’s Hospital Facilities Management PPP programme.

• Adana Hospital PPP - signed in 2014

• Etlik Hospital PPP

• Gaziantep Hospital PPP

• Konya Hospital PPP

• Elazig Hospital PPP

• Izmir Hospital PPP

• Kocaeli Hospital PPP

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Hospital Facilities Management PPP project

example-Ankara Etlik Hospital PPP

• Intended to service central Anatolia’s 12 million

• Project costs EUR 1.1 billion

• DBFLT 28.5 year concession

• 3,566 beds

• Construction, provision of medical equipment, maintenance for the facilities

• NO medical service provision

• Availability Payment from the Ministry of Health (fixed, linked to CPI and FX)

• Service Payment from the Ministry of Health (minimum guarantee; market testing

every 5 years)

• Compensation on Termination by Ministry of Health

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Financing of Turkish Hospital PPPs

EBRD debt size: max 35% of total financing.

A loan: € 50-100 million ticket size.

B loan: depending on syndication to other financial institutions.

Equity investments: where appropriate.

Maturity: up to 18 years (the tenor of the EBRD A-Loan can be max 3

years more than B-Loan tenor or the tenor of parallel loans).

Pricing: market pricing linked to risk level.

Security: concession agreement, physical security, where possible,

share pledge and also linked to creditworthiness.

Due diligence: to be carried out by professional advisors.

Emphasis: smaller cities where the investment’s social role is crucial.

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Financing Issues

The projects are sizable and require significant debt and equity tickets.

Sponsors expectations are towards aggressive structures:

Over leverage ?

Are there prudent cover ratios ?

Is equity commitment risk of sponsors addressed ?

Calculation of FX risks associated with the tariff mechanism ?

Due diligence to be carried out by professional advisors is very

important (legal, technical and financial).

Project Agreements (Direct Agreement) have been finalised with the

Authorities.

Environmental, social, health and safety issues can be challenging for

bigger bed-size hospitals.

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Integrated Approach to Hospital PPPs

The EBRD believes that the healthcare PPP programme launched by

the Ministry of Health (MoH) will have a strong demonstration effect for

the rest of Turkey including other sectors and other countries in the

region.

The EBRD is willing to be one of the long-term financiers.

Two key areas of support by the Bank to the Ministry of Health:

a) Value for Money assessment, and

b) performance and contract management

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Monitoring KPIs for various payment streams

Monitoring

Unit focus

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Conclusions

EBRD has successful experience in financing PPP projects in the

region and in Turkey.

EBRD supports authorities in developing projects. TC grants partially

finance project preparation, implementation and institutional

development.

EBRD offers long term debt and equity financing and takes on the

leading role in financing the private operator.

We have a long term engagement in Turkey and we would like to be a

preferred partner for both public authorities and investors.

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Contact

Jean Patrick Marquet

Director – Turkey

t: + 90 212 386 1138

marquetj@ebrd.com

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James Hyslop

Director – Municipal & Environmental Infrastructure

t: + 44 207 338 6957

hyslopj@ebrd.com

Aslı Erden Öztürk

Principal Banker – Municipal & Environmental Infrastructure

t: +44 207 338 6871

ozturka@ebrd.com