TURKEY'S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM - by Burak ISIK, Investment Development ...
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TURKEY’S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM by Burak ISIK, Investment Development Manager ICA, Istanbul, Turkey September 6, 2018
Agenda
ICA
About The Project
New Pearl of Bosphorus
Turkish Motorways before PPP’s
Turkish PPP Framework
Turkish Motorways with PPP’s
Tolling before PPP’s
Tolling after PPP’s
Future of Private Motorways in Turkey
2
ICA at a Glance
Essential Infrastructure “Where Europe Meets Asia”
ICA: The Concessionare of 3rd Bosphorus Bridge (which is named as
Yavuz Sultan Selim Bridge) and 160 km. Northern Ring Motorway of
Istanbul connecting 3 Airports of Istanbul.
Tendered in 2012 with a PPP structure, investment of 3.5 Billions USD
Modern Motorway Strategically Located in
the Region from 2013-2016, started operation in August 2016. Under Operation for
the last 2 years.
Started from 250.000 users/day and recently reached to 350.000 daily
users.
Favorable location in Istanbul and at Crossroads of Passenger and
State-of-the-Art Infrastructure and
Equipment Freight Flows, Linking Asia to Europe
The opening of the Largest Airport of Europe (New Istanbul Airport) is to
be opened later this year, to further boast the daily traffic.
ICA became the 23th ASECAP full member by January 2018
3
About The Project
Essential Infrastructure “Where Europe Meets Asia”
4
About The Project
Essential Infrastructure “Where Europe Meets Asia”
5
New Pearl of Bosphorus
“Yavuz Sultan Selim Bridge”
6
New Pearl of Bosphorus
“Where Europe Meets Asia”
Iconic Bridge: the World’s Longest, Highest and Widest Suspension Bridge with a Railway on the Same Deck
7
Pre-PPP (till 2016): KGM
All Motorway Investments and Operation by KGM (the Government Entity)
All Investments: Funded by the Government
All Operations were done by KGM (the General Directorate of Highways)
PPP Investments to boast the Motorways under operation
Started with the tenders in 2013, the first PPPs of Turkish Motorway Industry has started.
The first Motorway PPPs started operations in 2016.
Evaluation of Turkish Motorways
Before 2016
600 4,000
3,500 The Toll Level was at 1USc/km level
500
3,000 The collection was at 80%, and there were minimal enforcement for non-payers.
400 2,500
300 2,000 The level of Motorway Service was minimal
200 1,500
1,000
100 500
- -
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
KGM PPP Total Motorways
KGM Managed Motorways
PPP Motorways Under Operation
PPP Motorways Under Investment
8
Turkish Motorways PPP Framework
Risks shared by Public and Private Stakeholders
There is revenue guarantee: KGM to compensate the deficit revenue amount if the actual toll revenues
Risk and Responsibilities collected are less than the guaranteed traffic revenues calculated using the guarantee structure
•Project Finance Although there is the revenue guarantee Private Investors have the collection risk and this risk is not able to be
passed to O&M Co. fully.
•Design
Private •Engineering Procurement
Construction
Financing is the sole responsibility of Private Investors
Hgh Level O&M is the sole responbility of the Private Investors.
Investors •Operation & Maintenance
Debt Assumption
•Handover of Facilities in good Agreement
condition at the end
Lenders
•Project Finance
Debt Assumption
•Design
•Engineering Procurement
KGM Construction Loan
•Operation & Maintenance Agreement
•Handover of Facilities in good
condition at the end O&M Public Authority
Agreement
Project Company
O&M Company Implementation
Contract
EPC Shareholders’
Agreement Agreement
EPC
Sponsors
Contractor
9
Attractive PPP Framework
Well-Developed Regulatory Framework with Favorable Concession Terms
Traffic guarantee
• Based on fixed AADT for the Bridge and the Motorway separately
• KGM to compensate the deficit revenue amount if the actual toll revenues collected are less than the guaranteed traffic
revenues calculated using the guarantee structure
• Guarantee payment shall be paid annually by end of April of the following fiscal year
Toll tariffs adjustment
Guarantees defined in USD terms
Annual FX and USD inflation adjustments for toll tariffs
Tariffs are adjusted for CPI in January when official information is released
Financing guarantee
• Turkish State Treasury provides guarantees on loans and related financial obligations for c.90% of senior debt amount
10Toll Collection ICA
Toll Plazas & Free Flows
OGS
• 2.5M Subscribers
• Led by 5 Banks
• Payment Guarantee by Banks
• Active On-Board Unit
HGS
• 10M Subcribers
• Led by PTT & Mastercard
• 15 Banks are partners for
distribution
• Payment Guarantee by PTT
• Passive On-Board Unit
11KGM Toll Collection Post-PPP (by 2016):
All Motorway Investments and Operation All Motorway Investments and Operation
by KGM (the Government Entity) by Private Investors
OGS/HGS: Issuers Gurantees the Payment if the user is not in Black List, hence for All Investments: Funded by Private Investors
KGM, no need to check the credit balance
All Operation: was done by Private Operators, hence higher Level of Service
Closed Systems: Electronic collection with HGS and OGS
There is Revenue Guarantee of KGM, but the main funding is the users toll
No Barriers and/or Cashiers: Hence no Cash and/or Credit Card revenues
The collection was at 80%. The illegal pass is under the responsibility of the Operator, hence collection/
enforcement has been crucial
Little enforcement for non-subscribers or black list customers.
Each Lane recognize OGS and HGS since Private Investors invested the
Each lane recognize either OGS and/HGS since the systems are totally different, hence
infrastructure of each system to each lane to minimize the loss of revenue.
there is operational confusion and/or malicious usage of car owners. A HGS users, may
use OGS lane to use chance of non-payment or vise versa. OGS and HGS Issuers has not guaranteed the credit balance hence On-Line
Provision has started.
12Effect of ICA on Toll Collection Profile
Change in Payment Profle:
ILLEGAL PASS PROGRESS
Active OBU’s gained market share from 36% to 42% 6.54%
6.27% 6.42% 6.23% 6.10% 6.11%
7.00% 5.92% 5.87% 5.78% 5.54%
Electronic Collection Improved from 74% to 83% 6.00% 5.12% 4.97%
5.00% 3.87% 4.08% 3.92% 4.01% 3.90% 3.69% 3.66% 3.61% 3.56% 3.70% 3.57%
Illegal Pass decreased from 6% to 3% before enforcement 4.00%
2.13% 2.16%
3.00% 1.51% 1.79% 1.75% 1.52% 1.60%
1.30% 1.04% 0.98% 1.13% 1.09% 0.99% 1.23% 1.09% 1.15% 1.29% 1.27%
2.00% 0.90% 0.88% 0.87%
1.00%
Illegal Pass Profile: 0.00%
2016/09 2016/10 2016/11 2016/12 2017/01 2017/02 2017/03 2017/04 2017/05 2017/06 2017/07 2017/08 2017/09 2017/10 2017/11 2017/12 2018/01 2018/02 2018/03 2018/04 2018/05 2018/06
Reduced from 6% levels to 3% levels
Illegal Pass After Enforcement Illegal Pass Before Enforcement
With Enforcement reduced to 1% levels
Burder to operators is almost 0% (even positive) with
penalty regime on Illegal Pass.
Before 2016 After 2016
Strong Enforcement:
Max Toll Level 1 Usc /km 8 Usc/km
Administrative & Legal Enforcement is in place
Administrative enforcement is followed by Professional Collection Collection %20 Less than 1%
Agencies. /Illegal Pass
Penalties were 10 times of base toll (40% Operator, 60% Goverment) before Enforcement Low Strong
which was reduced to 4 times, to Operator, makes the payment for client easier.
Service Level Low High
13Future of Private Motorways in Turkey
Growth is expected with PPP
2 projects are already under operation
KM 2016 2018 2021 2023 4 Projects are already under investment
2 Projects is under tender (315km)
KGM 2.289 2.289 2.289 2.289 It’s expected to have 12 more projects to be tendered soon (3.754km)
Private 0 521 1.483 5.552
Total 2.289 2.810 3.772 7.841 Turkish Motorways by 2023
% of
0% 19% 39% 71%
Private
Existing Motorways
Ongoing Projects
Upcoming ProjectsTURKEY’S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM by Burak ISIK, Investment Development Manager ICA, Istanbul, Turkey September 6, 2018
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