Turkey’s north western regions have seen a flurry of transport projects of late, with bridges – specifically the third Bosporus bridge, which opened to traffic on 26 August 2016, and the recently financed Çanakkale Bridge – the crowning glory of the programme.

And anyone who has endured the pre-2016 traffic on Istanbul’s first or second Bosporus bridges can attest to the need for them.

Like its recent predecessor in the Bosporus, the €3.1 billion ($3.8 billion) Çanakkale toll bridge – which is scheduled to be operational in 2023 – is expected to further improve traffic in Istanbul, Turkey’s financial centre located around 200km to the north east. And it will also create an alternative route linking Europe to Asia Minor to the west of the Sea of Marmara. This will support trade in the region, the Turkish government expects, while improving transport links for Izmir, Turkey’s third most populous city with 4.3 million inhabitants sitting on the Aegean coast, some 300km south of Çanakkale.

The bridge will span the Dardanelles Strait (the Hellespont of Ancient Greece), linking Kocaeli village on the Anatolian side and Gelibolu’s Sultuce village in Thrace. And the project also includes a 45km highway between Gelibolu and Malkara on the European side.

The bridge is part of the Çanakkale-Tekirdağ-Kınalı-Balıkesir motorway project, and will link to the almost-complete 400km Gebze-İzmir highway at Balikesir. The Gebze-İzmir road will cut travel time from Istanbul to Izmir from nine hours to three and a half.

Numerical significance

At 4,023m, the Çanakkale Bridge will be the suspension bridge with the longest central span in the world (2,023m), overtaking Japan’s Akashi Kaikyo Bridge by 32m.

The planned year of opening is also 2023, which is the 100-year celebration of the creation of the Republic of Turkey.

Meanwhile, the groundbreaking ceremony took place on 18 March 2018, the anniversary of the Çanakkale War. And the bridge is also known as the 1915 bridge, after the year when Ottoman forces were victorious against an Allied World War I incursion into the Dardanelles, also known as the Battle of Gallipoli.

Financing

The bridge is the second Turkish infrastructure project to receive support from Korean lenders and investors over recent months.

The other project was the Gaziantep Hopsital PPP, which sponsors Samsung C&T, Salini Impregilo, and Kayi Insaat brought to financial close in May 2017, supported by KDB Infrastructure Investments Asset Management, the Export–Import Bank of Korea (Kexim), Korea Trade Insurance Corporation (K-Sure), and Samsung Life.

For Çanakkale Bridge, a €2.27 billion financing package was provided to sponsors Yapi Merkezi, Limak, SK, Daelim by 23 banks and institutions. This breaks down as:

• 70% international lenders – €1.58 billion
• 30% Turkish banks – €683 million

The lenders are:

• Standard Chartered – MLA, document and technical bank
• Natixis – MLA, traffic, modelling and insurance bank
• ING – ECA coordinator
• Deutsche Bank
• Bank of China
• DZ Bank
• ICBC
• Intesa SanPaolo
• Siemens Bank
• Islamic Corporation for Insurance of Investment and Export Credit (Islamic Development Bank)
• Korea Development Bank
• Kuwait Finance House
• KEB Hana Bank
• Shinhan Bank
• Denmark’s export credit agency EKF
• Korea Eximbank
• Finansbank
• Garanti
• Akbank
• Isbank
• Vakifbank
• Yapi ve Kredi Bankasi
• Kuveyt Turk

The 15-year debt, with a 5-year grace period, was signed on 16 March 2018.

Pricing on the uncovered commercial debt is thought to be around 500bp over Libor.

Meanwhile, pricing on the commercial covered tranche is thought to have been around 150bp with a 10-15% ECA premium over the 15-year tenor. All-in pricing is expected to be around 2.6-2.7%.

It will be covered by:

• KSure
• Korea Eximbank

Korea Eximbank also provided direct lending of €200-300 million. The Islamic Development Bank’s Islamic tranche is thought to amount to €100 million.

Meanwhile, ING’s tranche amounted to close to €200 million, provided under four separate facilities. ICBC also provided around €200 million, Finansbank provided around €100 million, and EKF provided less than €50 million.

The Korean-Turkish consortium’s ownership interests are:

• Yapi Merkezi – 25% (Turkish)
• Limak – 25% (Turkish)
• SK – 25% (Korean)
• Daelim – 25% (Korean)

The sponsor group won the BOT project in January 2017 with a 16-year concession signed in March 2017 with the grantor, the General Directorate of Highways (also known as KGM).

The group outbid Japan's IHI, China's CRBC, and Turkey's Cengiz and Kolin.

Turkey’s Ministry of Transport is guaranteeing payment under the concession for a minimum amount of traffic. If the bridge’s tolls do not meet the minimum, the MoT will top up revenues to the defined amount.

The bridge, which will be built to withstand seismic damage, will feature six traffic lanes and will slash the time required to cross the strait at Çanakkale to four minutes from the existing 45 minutes.

The sponsors will operate the bridge for 16 years, two months and twelve days – the shortest concession period proposed in the bids. After that, the infrastructure will be handed over to the Turkish state.

Advisers on the transaction are:

For sponsors:

• Standard Chartered – financial adviser
• Shearman & Sterling – legal
• Lake Fisher – traffic

For lenders:

• Clifford chance – international legal
• Verdi – Turkish legal
• Arup – traffic and environmental
• Mott MacDonald – technical
• Marsh – insurance
• Finansbank – traffic adviser
• Garanti – documentation bank
• EY – model adviser