Financing the Gebze-Orhangazi-İzmir Motorway: A Landmark BOT Project
Given its size and scope, financing the Gebze-Orhangazi-İzmir Motorway was no easy affair.
With a total cost of around $6.3 billion, the Gebze-Orhangazi-İzmir Motorway Project, (including the Izmit Bay Crossing and access roads), is one of the largest infrastructure projects in Turkey and includes erecting the fourth-longest suspension bridge in the world. The motorway, once complete, will reduce the average journey time from Istanbul, the largest city and financial capital of Turkey, to Izmir, located on the Aegean coast and the third-largest city in Turkey, from 8-10 to 3.5-4 hours.
Taking into consideration the immense scope and cost of such a project and due to the requirement of a rather complex financing structure, the Project is being structured as a public private partnership under the BOT model. Although construction of the project as a whole is expected to be complete in 2019, construction is ongoing, with certain sections moving to the operation phase as they come online, such as the suspension bridge, which is due to be operational in the first half of 2016. The legislation does not require project companies to commence operation as a whole and the implementation contract of the Project was designed to anticipate partial and sectional acceptance.
Main Pieces of Legislation
The main pieces of legislation governing the Project are the Law on the Procurement of Certain Investments and Services within the framework of the Build-Operate-Transfer Model (“BOT Law”), and the Council of Ministers’ Decree Concerning the Implementation Procedures and Principles of Law No. 3996 (“BOT Decree”), which together comprise the general procedures and principles relating to the appointment of joint stock corporations and foreign companies for building, operating and transferring certain investments and services within the framework of a Build-Operate-Transfer model. The awarding authority of the Project is the General Directorate of Highways (Karayolları Genel Müdürlüğü) (“the Directorate”). The Directorate is a public legal entity, established under the Law on the Organization and Duties of the General Directorate of Highways (“the Highway Law”), and affiliated with the Ministry of Transportation, Maritime Affairs, and Communications, but having its own private budget.