A syndicate of private and public banks has helped finance the Bosphorus tunnel, which will connect Europe and Asia.
US$1.4bn has been raised in total, with the lion’s share (approximately US$900mn) coming from a consortium of the Export-Import Bank of Korea (Kexim), K-sure, SMBC, Standard Chartered and Mizuho. The European Investment Bank (EIB) has contributed US$350mn, while the arranger, the European Bank for Reconstruction and Development (EBRD), has lent US$150mn.
Kexim and K-sure have guaranteed the loans, with some of the lenders, along with Deutsche Bank, providing the hedging facility for the transaction. The breakdown and terms of the commercial financing are unavailable, but a spokesperson for the EBRD tells GTR that the transaction is highly complex.
The Eurasia Tunnel will run under the Bosphorus straits, connecting Istanbul’s European and Anatolian sides. It’s designed to relieve some of the traffic congestion in a city of some 13 million people. At the moment, 400,000 vehicles use the existing transport facilities across the Bosphorus. The 5.5km tunnel will increase this figure by a further 100,000. It will be 25 metres below sea level and is scheduled for completion in 2017.
Speaking to GTR before the deal was signed, EBRD transport director Sue Barrett expressed her satisfaction at having closed deals like these given the market environment, but was confident that if the bank kept producing bankable projects, the financing would be forthcoming.
The tunnel will be constructed by ATAS, a joint venture between Yapi Merkezi and SK Engineering, two of the leading construction companies in Turkey and South Korea, respectively. It will be operated by the Turkish government.
The EBRD’s managing director for infrastructure Thomas Maier has described the deal as “groundbreaking”. He says: “Besides linking the two continents, the project is symbolic on another level. It will, for example, be the first road PPP agreed under the new Turkish Public Private Partnership Initiative for infrastructure. So now the Turkish government will have a template for funding more of the projects required to fill the country’s infrastructure gap.
“The Bosphorus tunnel project also illustrates how attractive emerging markets such as Turkey are to investors. Europe’s financial troubles may make potential investors think long and hard about committing to the continent. But EBRD-supported infrastructure projects involving the private sector in Turkey or in Russia, the Eurasia Tunnel in Istanbul or the motorway bypass project in St Petersburg, are exciting opportunities for all concerned.”
Mike Davey, EBRD director for Turkey, says: “The Eurasia Tunnel will get commuters home more quickly, but it will also strengthen Istanbul’s position as an international air hub by allowing faster transport possibilities from airports on either side of the Bosphorus. The EBRD believes Turkey – which today is one of the world’s most dynamic economies – needs increased and improved transport capacity, and we will consider other infrastructure projects that will make it easier to travel to and in Turkey.”