More than three years and an aborted start later, Turkey’s Privatisation Administration has finally launched the tender for the privatisation of some 2,000 kilometres of road – a package said to be worth between $4 billion and $5 billion.
The roads package includes Istanbul’s two suspension bridges – said to comprise up to 80 percent of its total value – and will be tendered to the private sector for a period of 25 years. The winner will be responsible for maintaining and operating the assets and will be remunerated by collecting tolls along the roads and bridges.
Interested parties will have to pay a $200 million bond to the Turkish Privatisation Administration in order to participate in the bidding process. The privatisation body expects consortia to submit their qualifications no later than November 18 with bids to be submitted on December 15.
To view the complete tender announcement, please click here.
Turkey’s roads privatisation was first touted in mid-2008, but was ultimately aborted due to the impact of the global financial crisis, as it was deemed too big for cash-strapped European banks and their developer clients to digest comfortably. The deal, has, however, attracted widespread attention from the industry, with a consortium of Brisa and Akfen looking at the package alongside companies like Atlantia, Limak, Abertis, Dogus and Maykol.
Luis D’Eca Pinheiro, Brisa’s head of investor relations, referred to the roads package in Infrastructure Investor’s special report on Turkey, published in February, as an “all or nothing deal”. He added: “This is going to be a big operation. And since it’s going to be tendered as a single package, we [Brisa] either win it, and enter the Turkish market, or we don’t.”
The package’s size, together with its full exposure to traffic risk, might complicate the deal. “This package is going to require banks to take on full traffic risk. After the financial crisis, international banks have been reluctant to take on traffic risk,” Sule Kilic, head of financial advisory at Unicredit Turkey’s investment banking division, told Infrastructure Investor in February.
The upside is that the roads package has a “long traffic history, which supports stable traffic numbers, even during times of crisis,” Kilic highlighted. “The assets are [also] seen as providing an attractive IRR [internal rate of return] as traffic has been forecast to increase at 15 percent per vehicle/kilometre on an annual basis,” law firm Ashurst wrote in note on Turkey, also released in February.
Because of the deal’s size, though, international banks will almost certainly have to participate in the tender, exposing them to the currency risk associated with matching lira-denominated tolls with euro- or dollar-denominated bank loans. In February, Ashurst also stressed that it was unclear “what control there will be over lifecycle/maintenance regimes or whether there will be protection against the impact of future competing roads”.
To find out more about the roads privatisation, please revisit our special report here.
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