Exclusive: Meridiam closes third Turkish hospital

The facility’s sponsors used the country’s first green and social project bond, credit-enhanced by the EBRD and MIGA, to gather €288m for Elazig PPP.

Meridiam Infrastructure has reached financial close on the Elazig Integrated Health Campus PPP Project, a 1038-bed health campus in eastern Turkey.

The Paris-based fund manager teamed up with Turkish group Ronesans, the European Bank for Reconstruction and Development and the Multilateral Investment Guarantee Agency to structure a credit-enhancement scheme that allowed them to sell a €288 million green and social infrastructure bond, the country’s first for an infrastructure project. Elazig’s total costs amount to about €360 million.

Thierry Déau, Meridiam’s founder, chairman and chief executive, told Infrastructure Investor that the impetus to use a green instrument had gained momentum in the wake of the 2015 Climate Change Conference in Paris.

“As part of COP21 there was a task force of which we were part that was focused on finding risk-mitigation tools that could allow developing countries to finance green infrastructure and credit-enhance their projects. The structure put in place for Elazig achieved this: the bond was rated two notches above Turkey’s sovereign rating,” he said, noting that Moody’s assigned a Baa2 to the instrument.

The bond was subscribed to by a handful of institutional investors from Europe, Japan and China. These included Proparco, the investment arm of the French development agency. The EBRD will provide a liquidity facility during construction and operation while MIGA is offering insurance cover against sovereign risk.

The International Finance Corporation also underwrote a portion of the financing without credit enhancement.

Elazig is the third hospital PPP closed by Meridiam after the €550 million Adana Integrated Healthcare Campus and the Yozgat Education and Research Hospital Project. The next facility the firm is looking to close is the Bursa healthcare campus, a 1,355-bed, €530 million project in Western Turkey. This could happen in the first quarter of next year, Déau said.

He hopes the structure will be replicated so as to help catalyse private financing towards other types of projects.

“It is a very useful product for countries that are rated just below investment grade and for which we could build a structure that would attract investors that otherwise wouldn’t buy it.”