Koc leads winning group in Turkish highways auction

Financial Times (UK)  Tuesday, December 18, 2012, p. 16

By Daniel Dombey in Istanbul

Koc Holding, Turkey’s biggest conglomerate, has successfully bid $5.7bn together with two partners to win a 25-year highway concession in the country’s secondbiggest privatisation.

The auction underlines how infrastructure financing, which has proved elusive for long-term Turkish projects in the past, is now less difficult to secure.

Koc and its partners UEM, a state-owned Malaysian engineering group, and Gozde, a private equity group owned by Turkey’s Yildiz Holding conglomerate, will now operate and maintain a network of 1,975km of highways, including the toll roads on two bridges that cross the Bosphorus. Koc and UEM each account for about 40 per cent of the consortium while Gozde holds the remaining 20 per cent.

Despite its size, their winning bid came within expectations for some of the most travelled roads within Turkey, including the Edirne-Istanbul-Ankara highway and the Ankara ring road, as well as the two, often congested, bridges.

Tamer Hasimoglu, one of Koc’s senior executives, highlighted the transaction’s importance for Turkey’s economy as a whole and its status as the biggest such concession in Turkish history – outstripped as a privatisation only by the $6.55bn sale of 55 per cent of Turk Telekom in 2005.

The deal comes as Turkey continues to enjoy faster growth than many other European countries, despite a slowdown in the domestic economy, and after it was awarded investment grade status last month by agency Fitch Ratings.

It also follows in the wake of the successful $1.96bn bid last week by a consortium of three Turkish construction companies for the right to operate an Istanbul electricity distribution grid for 30 years. After a previous auction for the same electricity group two years earlier, the winning bidders proved unable to come up with the funds.

Similarly, a concession to build Istanbul’s third bridge over the Bosphorus finally got off the ground in April when the project was reduced in size by splitting it off from other concessions. Meanwhile, $960m of financing for a road tunnel between Istanbul’s Asian and European sides was put in place this month – four years after the tender was awarded – only with the aid of the European Investment Bank and the European Bank for Reconstruction and Development.

Turkey’s needs remain formidable. Alper Yuksel, corporate banking head of Akbank, says that infrastructure financing needs over the next five years could come to more than $50bn, with port modernisation and a planned third airport for Istanbul costing more than $10bn apiece.

However, it has often proved difficult to raise long-term capital on the Turkish domestic market, with many of the country’s biggest corporates looking to European lenders.