Less than two months on from Turkey’s attempted coup, the country’s infrastructure developments seem to be progressing. While some banking sources say recent events mean they will proceed with caution on deals to come, many industry observers feel that the country’s underlying economics will continue to support interest from international lenders and investors.

Hospital deals

Last week, the European Bank of Reconstruction and Development (EBRD) announced that it is considering financing Turkey’s €600 million ($675 million) Gaziantep integrated health campus PPP with a loan of up to €80 million and additional facilities to be provided by export credit agencies, commercial banks and institutional investors. According to one source, the Korean Development Bank is expected to participate in the deal.

The Gaziantep deal is one of a number of projects within the country’s €12 billion healthcare PPP programme that has received support from the EBRD over recent years. “The EBRD is a strong supporter of Turkey’s hospital PPP programme and we remain engaged and committed,” the EBRD’s director for Turkey Jean-Patrick Marquet said in an email sent to IJGlobal on 8 September 2016.

Before the end of the month, EBRD expects to sign on transactions for the Izmir Bayrakli and Kocaeli integrated health campuses alongside other lenders and financial institutions, it has said. The two facilities will be developed by a consortium that brings together Turkerler and GAMA along with GE Healthcare, through a financing packaging that will include contributions from the US government’s development finance institution OPIC and Canadian export agency Export Development Canada, as well as the EBRD. Sources have indicated that two commercial banks from China and Germany will also participate in the deal under the EBRD’s B-loan structure, and Italy’s UniCredit will provide advisory services.

Meanwhile, other projects are also moving forward. The deal for Akfen’s 1,081-bed Eskisehir City Hospital in northwest Turkey has just been signed and financial close is expected over the next month or two. Two Turkish commercial banks will be providing the debt for this project, one source said. And financial close is planned for late this year or early next year for MCN Holding’s Bilkent Laboratory PPP. The transaction had been expected to reach completion for a while, and now it seems to be happening, said a source.

At the same time, Mersin hospital, which was expected to become operational in August—the first of Turkey’s healthcare programme to open—is delayed, but start up is now planned for the next few weeks. And sources have indicated that the sponsors for this project may be considering refinancing Mersin’s debt via a project bond once some operating experience has been achieved, signalling confidence in continued investor appetite despite recent turbulence and limited use of project bonds for Turkish infrastructure projects to date. Additionally, the long-awaited Euro private placement planned by Meridiam and Ronesans for their Elazig Integrated Health Campus will also materialise soon, sources believe.

Cautious optimism 

Beyond the healthcare sector, sources expect a tender for construction of the Çanakkale Strait Bridge, which is intended to ease traffic congestion in Istanbul and has been in the pipeline for some time, to be launched over the next two months.

All the activity reflects the political environment that has become more favourable to the PPP concession model with the new ministers who came to power in May, one local source explained. And last month, Turkey’s parliament adopted a law establishing a state-owned investment fund that will promote development of the country’s capital markets and provide funding for major infrastructure projects, he added.

However, despite the optimism, at least one international firm seems to have been scared off by recent events. UK-based construction and support services firm Interserve had been planning to participate in some of Turkey’s hospital PPPs, but now sources have said the company has decided to shelve it plans.

But this may be an exception, one market observer suggested. “If [the attempted coup] had happened during the golden years, they would have run a mile,” he commented, explaining that for most international investors and lenders Turkey remains a viable proposition.  

In the more turbulent global environment that has emerged after the financial crisis of 2008-09, a number of factors, including the UK’s recent referendum vote on EU membership, have contributed to corrode investor confidence in other markets, meaning that Turkish risk may still be considered acceptable, he said. And even if interest from international sponsors and lenders decreases, robust Turkish construction and banking sectors will be able to pick up much of the slack, he highlighted.

Despite some anxiety following July’s events, many of Turkey’s infrastructure projects seem to be bravely pushing ahead, at least for now.