The Turkish ministry of transport has signed a contract for one of its largest build-operate-transfer (BOT) projects – a $6.5 billion highway connecting Gebze, near Istanbul, to Izmir, Turkey’s third most populous city, located to the west of the country.
The 421-kilometre BOT highway deal was awarded in July 2009 to a consortium led by Astaldi, Italy’s second-largest construction company, and local contractors Nurol, Ozaltin, Makyol, Yuksel and Gocay.
According to a statement from Astaldi, the deal is looking very profitable for the consortium and is expected to generate $23 billion in revenues over the length of its 22 years and 4 months concession period to offset an investment of $6.5 billion.
The official signing now paves the way for financial advisers Citigroup, Turkish bank Akbank and BIIS, the infrastructure arm of Italian bank Intesa Sanpaolo, to start putting together the debt package for the deal.
Astaldi’s presence in the consortium and BIIS’ in the financial advisory team are generating strong interest among Italian banks, although an Italian banker pointed out that discussions are still at a very early stage, with teaser documents yet to be issued by the advisers.
While the final structure is still being negotiated, the financial advisory team is looking at putting together a debt package of close to $5 billion using commercial bank debt, multilateral financing, a bond issue and possibly Islamic financing, the banker pointed out. That would potentially leave the consortium to write an equity cheque of $1.5 billion.
Construction of the highway is set to start in 2011 and will last for seven years, Astaldi said. The highway is expected to cut travel times from Istanbul to Izmir down to 3.5 hours from the current eight hours, the ministry of transport added. The project will include the construction of a suspended bridge over Izmir bay.
Successful financial close of the motorway contract will boost Astaldi’s concessions business and is likely to make it easier for the company to attract outside investors for its concessions unit.
Chief executive Stefano Cerri said in February that he planned to place Astaldi’s concessions business in a separate company with a view to opening it to outside investors once the business matures. He said that several infrastructure funds had already shown interest in buying into a separate concessions unit.
Astaldi’s concessions portfolio includes several hospitals in Italy, a car park in Bologna, the concession for a Milan metro line, a road build-operate-transfer contract in Turkey, and the Cachapoal hydroelectric concession in Chile.