After a long and much delayed process, the privatisation of close to 2,000 kilometres of roads – including Istanbul’s two suspension bridges – ended on a sour note, with the government cancelling the sale of the assets to a Turkish-Malaysian consortium.
Late last December, Koc Holding (40 percent), Turkey’s biggest industrial and services group, Malaysia’s state-backed engineering concern UEM Group (40 percent), and Turkish-listed private equity firm Gozde Girisim Sermayesi Yatirim Ortakligi (20 percent) won a 25-year concession to operate and maintain the roads package, after tabling a $5.72 billion bid for the assets.
But Turkish Prime Minister Recep Tayyip Erdogan was ultimately not satisfied with the consortium’s offer.
“Because we found the figure low, we cancelled the tender,” Erdogan said at a news conference last Friday, according to Turkish media. “There are different kinds of privatisations. It doesn't have to be a block sale. Work is being carried out [including] on a public offering. We could take a step that would offer to the public a certain share,” the Turkish Prime Minister added.
Commenting on the cancellation, the winning consortium said it had “submitted the highest bid to this tender after a meticulous preparatory and feasibility process. The consortium embraced this project as a solid expression of its commitment to the Turkish economy, today and tomorrow. However, all tenders awarded by the Privatisation Administration of Turkey are subject to the final approval of the Privatisation High Council”.
The High Council, headed by Erdogan, and the country’s Finance Ministry jointly cancelled the bid.
The assets included in the original roads package generated some $445 million in tolls last year. The package was put up for sale in August 2011, suffering several delays until it was finally awarded last December. The roads privatisation was first touted in mid-2008, but failed to gain traction due to a decline in available funding, caused by the emergence of the global financial crisis.
Had it been approved, the roads sell-off would have been Turkey’s second-largest privatisation.
The cancellation notwithstanding, the Turkish project finance market had a strong 2012, with the $1.24 billion Istanbul Strait Road Crossing Project – a road and undersea tunnel linking Istanbul’s European and Asian sides – reaching financial close in December after three-and-a half years in the market. The project was backed by an 18-year, $960 million loan – arranged by financial advisor Unicredit – which had the distinction of being Turkey’s longest project financing.
Prior to that, Turkish airports operator TAV clinched a $250 million debt package to help build a new domestic terminal at Izmir Airport, located in Turkey’s third-largest city. And in May 2012, Italian developer Astaldi won a build-operate-transfer contract for a $2.5 billion third Istanbul bridge.