Lending and investing in concession-based projects in Turkey is more challenging than it needs to be primarily because concession agreements are not creditor friendly. Protections often found in emerging market concession agreements are absent and the drafting of the agreements and the official English translations of the original Turkish versions often difficult to decipher.
The tendering governmental authorities have not been particularly open to accepting proposed amendments to the draft concession agreements (whether the agreement is in the form of a transfer of operating rights agreement, an implementation contract, a lease or any other form), nor have they shown any inclination to enter into any negotiations with winning bidders. This "take it or leave it" approach stems partly from the fact that any improvement in the terms of a concession agreement after the tender has been released could result in losing bidders challenging the award on the basis that the concession agreement was not signed in the form it was tendered.
At the recent 3rd Turkey Infrastructure Conference hosted by Unicredit Group (HVB) in Istanbul, there was much discussion on the bankability issues arising from Turkish concession agreements. In a departure from the position that the Privatisation Administration of Turkey (PA) has historically maintained, Yildiz Koc, head of the PA toll roads project team, indicated that the PA was prepared to take on board suggestions being made by foreign investors and international banks to make Turkish concession agreements more bankable.
In this article we examine the types of problems that are found in...
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