emre aykar's presentation

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



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




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


Vast Investment Needs

Transportation Energy Education

Healthcare Defense Housing



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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



Turkey’s Fiscal Position is Supportive

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Maastricht Criteria: 60%



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



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)



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




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




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.



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



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



The 3rd Bosphorus Bridge


• 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


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




• 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)




• 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.



Gebze - Orhangazi - Izmir Highway• Client: General Directorate of Highways

• Investors: Nurol-Özaltın-Makyol-Astaldi-Göçay Joint Venture

• 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 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



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.



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)



Location

Eurasia Tunnel


Current Traffic Situation on the Strait Crossings (Bosphorus Bridges)

Eurasia Tunnel

Bosphorus Bridge - (1st Bridge) Fatih Sultan Mehmet Bridge - (2nd Bridge)


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


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


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


Eurasia Tunnel

Contractual Framework

Concession

Agreement, Minimum Revenue

Guarantee

Sponsors

Administration, Ministry of Transport

ImplementationContract Direct

Agreement

DebtAssumptionAgreement


Eurasia Tunnel

Chronology


Eurasia Tunnel

Project Sponsors – Yapı Merkezi

Dubai Metro

Haramain High Speed Railway Madinah station


Eurasia Tunnel

Ethiopia Awash – Kombolcha – Hara Gebaya R.

Four Seasons Hotel Ankara Konya High Speed Railway



Eurasia Tunnel

Algeria Bir Touta – Zeralda Railway

Casablanca Tramway QATAR METRO



Eurasia Tunnel

Project Sponsors – SK E&C

Kapsarc R&C Complex, S. ArabiaSK Telecok T-Tower, Seul Korea

RPMAA Rafinery Complex, Kuweit


Eurasia Tunnel

Project Sponsors – SK E&C

Yeosu Crude Oil Underground Storage, Korea S Trenue Tower, Seul Korea

Incheon Bridge, Korea


Eurasia Tunnel

International Stakeholders and Consultants

Design Leader: Parsons Brinckerhoff (USA)

Design Verification: HNTB (USA)

Technical Due Diligence: ARUP (UK)

Traffic Studies: Jacobs (USA) and ARUP (UK)

Insurance Advisors: Marsh, JLT

Lead Re-insurers: Münich Re, Swiss Re

Tunnel Operation: EGIS (France)

Geotechnical Studies: Fugro (Netherlands)

TBM Supplier: Herrenknecht (Germany)

Environmental Consultant: ERM (Germany)

Financial Adviser: Unicredit

Legal Advisers: Clifford Chance, Skadden, Fidan&Fidan, HBO


Eurasia Tunnel

Cross Section


Eurasia Tunnel

Upper Roadway Deck (Cast in

Situ)

Lower Roadway Deck (Precast)

Upper Corbel

Lower Corbel

Utility Gallery

Precast SegmentLining(t=600mm)

12.000600 600

13.200

Cross Section


Eurasia Tunnel

Geological Conditions

• 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.


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.


Eurasia Tunnel

Assembly of the Tunnel Boring Machine


Eurasia Tunnel

Excavation Pit


Eurasia Tunnel

Tunnel Boring Machine at Work


Eurasia Tunnel

Segment Stock and Delivering


Eurasia Tunnel

Prior to Deck Construction


Eurasia Tunnel

Upper – Deck Formwork


Eurasia Tunnel

After Deck Construction


Eurasia Tunnel

Deck


Eurasia Tunnel

Road Widening


Eurasia Tunnel

Crossing


Eurasia Tunnel

ATB


Eurasia Tunnel

ETB


Eurasia Tunnel

NATM Tunnels


Eurasia Tunnel

Excavation Ceremony


Eurasia Tunnel

Breakthrough Ceremony


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


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


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


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)


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


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


Eurasia Tunnel

Final Remarks


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.


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.

THANK YOU FOR YOUR ATTENTION

Emre AYKAR

[email protected]

«I wish you many successful PPP

projects in your countries!»

emre aykar's presentation

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