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
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
Turkey’s PPP Experience
13
Build-Operate-
Transfer; 105; 48%
Build-Operate; 5;
2%
Build-Lease-
Transfer; 21; 9%
Transfer of
Operating Rights;
90; 41%
Turkey’s PPP Experience
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 $
Turkey’s PPP Experience
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.
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
North Marmara Motorway Project (Including 3rd Bosphorus Bridge)
22
MAHMUTBEY
ODAYERİ
POYRAZKÖY
REŞADİYE
PAŞAKÖY
ÇAMLIK
GARİPÇE
SULTANBEYLİ
RİVA
HÜSEYİNLİ
USKUMRUKÖY
IŞIKLAR
3.AIRPORT
SABİHA GÖKÇEN AIRPORT
ATATÜRK AIRPORT
BAŞAKŞEHİR
North Marmara Motorway Project (Including 3rd Bosphorus Bridge)
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,
Investment Cost: 666 million $,
Bed Capacity: 1550,
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
.
29
Yozgat Health Campus
Model: BLT,
Investment Cost: 178 million $,
Bed Capacity: 475,
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
.
30
Isparta Health Campus
Model: BLT,
Investment Cost: 308 million $,
Bed Capacity: 755,
Construction Period: 3 years,
Operation Period: 25 years,
Contract signed by 2014,
In operation by 2017,
Bid Evaluation Criteria: The lowest lease amount.
* In 2017 prices
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,
Operation Period: 25 years,
Contract signed by 2012,
Bid Evaluation Criteria: The lowest lease amount.
* In 2017 prices
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,
Bid Evaluation Criteria: The lowest lease amount.
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.
Lessons Learned for a Successful PPP
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.)
Lessons Learned for a Successful PPP
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.
Lessons Learned for a Successful PPP
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).
Lessons Learned for a Successful PPP
43
PPP is a useful tool
Lessons Learned for a Successful PPP
IF
IS DONE
PROPERLY
RISK ALLOCATION
CONTRACT MANAGEMENT
COORDINATION AND PLANNING