TURKISH PPP EXPERIENCE And A Milestone Project: Istanbul Strait Road Tube Crossing Emre AYKAR President – CICA (Confederation of International Contractors’ Association), Vice President – TCA (Turkish Contractors’ Association) Partner, Member of the Board – Yapı Merkezi
September 2, 2015 – Kuwait City Turkish PPP Experience
Contents
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 Main Idea of the Presentation
How to transform a desirable project on a government wish list to an attractive investment opportunity for potential private sector partner?
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience with Reference to Major Ongoing PPP Projects
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
Macroeconomic Outlook of Turkey in 2014
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.
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
Vast Investment Needs
Transportation Energy Education
Healthcare Defense Housing
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
GDP Growth and GDP Per Capita in Turkey
GDP Growth and GDP per capita in Turkey
10,00 9,20 12.000 8,80 8,40 10.822 8,00 10.444 10.428 10.459 10.404 6,90 10.003 10.000 9.247 6,00 4,70 8.561 4,20 8.000 4,00 7.597 7.036 2,90 2,10 2,00 6.000 0,70
- ($) PER GDP CAPITA
GDP GROWTH RATE (%) RATE GROWTH GDP 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4.000
-2,00
2.000 -4,00
-4,80 -6,00 - YEARS
GDP Growth Rate (%) GDP Per Capita ($)
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
Turkey’s Fiscal Position is Supportive
4,5 120 111,1
4 3,9
100
3,5 89,1
3 Maastricht Criteria: 3% 3 80
2,5 Maastricht Criteria: 60%
2,1 60 GDP GDP (%,2014)
2 -
to -
1,5 Debt 40,1 40 Budget Deficit BudgetDeficit GDP to (%,2014) 33,1
1 0,8
20 0,5
0 OECD EU -28 Emerging Markets Turkey 0 OECD EU -28 Emerging Markets Turkey
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
Turkish Government Has a Positive Approach for PPP’s • Financial Benefits Substantial Increase in FDI levels Efficient utilization of International Bank and Capital Markets
• Macroeconomical Benefits Creating new focused sectors /higher employment and new brand names
• Central Budget Benefits Easing the financial burden in central budget (Off-balance sheet) Thus improving sovereign debt and credit ratings
• Fair share / usage of infrastructures Projects are funded / paid for by the real end-users
• Feasibility / Project Realization Benefits The Government can focus, assign and direct funds to other more social projects No cost overruns / No time overruns / higher service life quality)
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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 Energy years of PPP Implementation)
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
PPP Implementation in Turkey Project in Operation Project in Financial Total Close/Construction
Project Number 153 30 183
Project Value USD 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
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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.
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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. 2013 • 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
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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) will be diverted out of the city limits o To be the longest spanning suspension bridge in the world that has a rail system on it
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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 and meteorology systems, other service buildings and systems)
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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 several phases o At completion the airport’s capacity will be sufficient to service 150,000,000 passengers per year o Istanbul to become a regional and international hub for air passenger traffic o PPP structure is based on many succesfully completed airport concessions in Turkey’s past.
September 2, 2015 – Kuwait City A General Outlook to Turkish PPP Experience
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 motorway and 43km connection roads; Including a suspension bridge (İzmit Bay Crossing Bridge) of about 2,6km in length
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 project stretches has one third of Turkey’s population and includes the seven most industrialized cities contributing to 45% of GDP
September 2, 2015 – Kuwait City A General Outlook toTurkish PPP Experince
Bilkent Integrated Health Campus
Client: General Directorate of Health Investments Investors: IC İçtaş – Dia Holding fzco Joint Venture Scope: 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 the facilities management services and other clinical and non-clinical support services over 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 Banks and International Finance Institutions
September 2, 2015 – Kuwait City Presentation of a Milestone Project: Istanbul Strait Road Tube Crossing (The Eurasia Tunnel)
September 2, 2015 – Kuwait City Eurasia Tunnel
Location
September 2, 2015 – Kuwait City Eurasia Tunnel
Current Traffic Situation on the Strait Crossings (Bosphorus Bridges)
Bosphorus Bridge - (1st Bridge) Fatih Sultan Mehmet Bridge - (2nd Bridge)
September 2, 2015 – Kuwait City Eurasia Tunnel
Scope • Providing continuous flow of traffic between Asian and European Side of Istanbul in a safe, robust and comfortable fashion. • Significant time savings • Shortest path between Atatürk and Sabiha Gökçen airports • No effect on the “Silhouette of Istanbul” • Net savings in pollutant emissions with reduced travel time – An Environmental Fiendly Project
September 2, 2015 – Kuwait City Eurasia Tunnel
Scope 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.
PART 1 PART 2 PART 3
September 2, 2015 – Kuwait City Eurasia Tunnel
Parties
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 Administration, Ministry of Transport
Debt Assumption Agreement Concession Implementation Agreement, Contract Direct Minimum Revenue Agreement Guarantee
Sponsors
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
Project Sponsors – Yapı Merkezi
Ethiopia Awash – Kombolcha – Hara Gebaya R.
Four Seasons Hotel Ankara Konya High Speed Railway
September 2, 2015 – Kuwait City Eurasia Tunnel
Project Sponsors – Yapı Merkezi
Algeria Bir Touta – Zeralda Railway
Casablanca Tramway QATAR METRO
September 2, 2015 – Kuwait City Eurasia Tunnel
Project Sponsors – SK E&C
RPMAA Rafinery Complex, Kuweit
SK Telecok T-Tower, Seul Korea Kapsarc R&C Complex, S. Arabia
September 2, 2015 – Kuwait City Eurasia Tunnel
Project Sponsors – SK E&C
Incheon Bridge, Korea
Yeosu Crude Oil Underground Storage, Korea S Trenue Tower, Seul Korea
September 2, 2015 – Kuwait City 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
September 2, 2015 – Kuwait City Eurasia Tunnel
Cross Section
September 2, 2015 – Kuwait City Eurasia Tunnel
Cross Section
Precast Segment Lining(t=600mm)
Upper Roadway Deck (Cast in Situ) Upper Corbel
Lower Roadway Lower Corbel Deck (Precast) Utility Gallery
600 12.000 600
13.200
September 2, 2015 – Kuwait City 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.
September 2, 2015 – Kuwait City Eurasia Tunnel
Seismic Provisions
European Side Asian Side
Seismic Couplings 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
Investment Summary 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
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 200,000,000
Banks (funded by EIB):
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 previously completed PPP projects have contributed to the current mature PPP sector with solid legal, 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 and international Investors to Turkish Infrastructure PPP Market.
• Since the first succesful implementations of PPP’s in Turkey, this framework has been and will continue to be, the solution for ensuring succesful financing of infrastructure investments 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 infrastructure investments 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 sovereign balance 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 perfect knowledge and training centers to identify and manage all aspects of well-prepared infrastructure projects and they also ensure succesful implementation of Global Developmental Goals through PPP projects.
September 2, 2015 – Kuwait City «I wish you many successful PPP projects in your countries!»
THANK YOU FOR YOUR ATTENTION Emre AYKAR [email protected]