Infrastructure and privatizations

PPP models
Financing of ppp projects: state guarantees

Turkey’s Privatization and Public Private Partnership (PPP) history dates back to the 1980s when the first laws were enacted to promote private sector involvement in the public sector. The privatization model was first implemented to complete the construction of unfinished public facilities and to build new ones. Turkey’s privatization portfolio now encompasses a large variety of assets and sectors, including power plants and highways as well as the national lottery. The approximate value of privatizations completed between 1986 and 2018 is US$70.2bn

In addition to the privatization of existing assets, the last few years have seen a significant increase in the number and size of projects carried out under the PPP model. The first PPP projects were in the energy sector, followed by transportation, water supply/treatment and healthcare projects. The economic fundamentals, demand for infrastructure and the state’s support for such projects indicate that Turkey is a market with many opportunities in this area.

Different PPP models, including Build-Operate (BO), Build-Operate-Transfer (BOT), Build-Lease-Transfer (BLT) and Transfer of Operating Rights (TOR) have been introduced under separate laws. The BO model has been used in certain combined cycle power plants and thermal power plants. Currently, the most frequently used models for greenfield energy and infrastructure PPPs are BOT and BLT and the TOR model is most often used for brownfield privatization projects.

Domestic and foreign banks, as well as the international financial institutions, such as the International Finance Corporation and the European Bank for Reconstruction and Development, are active participants in the Turkish PPP market.


The Privatization High Council and the Privatization Administration are responsible for implementing privatization policies in Turkey. The Privatization High Council, which reports to the President, is the ultimate decision-making body on privatizations. The Privatization Administration is the executive body for the privatization process.

The following chart, based on Privatization Administration data, shows privatization revenues between 1986-2018:

Privatizations may be carried out by using one or more of the following methods:

  • Asset or share sale through a block sale, domestic or international public offerings, or a combination of these;
  • Lease of assets for a term to be determined;
  • Transfer of Operating Rights (TOR);
  • Establishment of limited rights in rem such as servitude rights or usufruct rights; or
  • Income sharing through issuance of a financial instrument, similar to a project bond, to promote investor participation.

In energy and infrastructure projects such as ports, airports and hydropower plants the Privatization Administration has frequently used the TOR model.

PPP models

BOT model

The General BOT Law has been applied to various infrastructure and energy projects. A number of greenfield transportation (airports, roads, bridges, ports) and energy projects are being developed under this model.

Pursuant to the General BOT Law, the state enters into an implementation agreement, the term of which may be up to 49 years, with a winning bidder. At the end of the operating term, the project must be transferred back in good working condition, at no cost and without any encumbrances to the state.

If the company fails to fulfil its obligations under the implementation agreement the state has certain rights to step into the project, including taking over certain contractual arrangements that the project company has put in place.

There are exemptions from value added tax for BOT projects. Furthermore, some transaction documents, services and other activities undertaken by Turkish project companies (or companies whose operations are managed out of Turkey) are exempted from stamp tax and other charges. Double taxation agreements and bilateral investment treaties to which Turkey is party may provide certain additional protection to foreign sponsors and lenders. Please see “Protection of Investment” for further details on protection of foreign investments.

BLT model

In recent years, the Turkish healthcare market has undergone major reforms requiring substantial new investments in healthcare infrastructure. Due to the limited public resources available to fund new investments in healthcare, the state has decided to procure them by using the BLT model. There are currently approximately 20 projects on the Ministry of Health’s agenda that are at different stages of development, eight of which are in service.

Under the BLT model, the project company constructs or renovates the healthcare facility and then leases the facility to the state for a certain period and specified price. The project company may also develop and operate certain non-healthcare services such as hotels and restaurants. There are certain factors to take into account when setting lease payments, including the term of the project, cost and profitability and projected revenue stream from non-healthcare services.

There are three ways in which healthcare PPP projects are awarded: (i) open bid after pre-qualification; where bidders are selected after an initial application process, (ii) open bid procedure and (iii) a negotiated procedure. Healthcare PPP regulations favor the open bid after the pre-qualification process.

The term of a project may be up to 30 years and starts from the handover of the premises to the project company.

Services and other activities by Turkish project companies (or project companies whose operation are managed out of Turkey) under the BLT model are exempted from stamp tax. There are also statutory exemptions from value added tax for healthcare PPP projects. 

Financing of PPP projects: state guarantees

PPP projects function under the general principle that the project company must procure the financing to undertake the project. Different types of state guarantees may be available depending on the type and volume of the project.

In an attempt to increase the bankability of big-ticket projects, the government has promulgated a regulation on foreign debt assumption by the General Directorate of Public Financing. In case of early termination of the implementation agreement in a BOT or BLT project, the General Directorate of Public Financing may take over the project company’s outstanding financial obligations, either partially or in full, including derivative instruments. To qualify for debt assumption the investment amount must exceed certain monetary thresholds. The debt assumption would cover the project company’s outstanding foreign debt and other financial obligations and costs, including derivative instruments. The debt assumption may also cover outstanding interest payments (contractual and default) if the shareholders of the project company provide the General Directorate of Public Financing with a joint and several guarantee as set forth in the applicable legislation.

For BOT and BLT projects the state may also provide demand guarantees. Depending on the type of the project these guarantees may take the form of traffic/passenger guarantees (road and airport projects) and patient guarantees (healthcare projects). If such a guarantee is provided the implementation agreement will include provisions as to how the state and the project company will split the surplus (i.e., where the generated income exceeds the amount of demand guaranteed by the state).

In an attempt to create further funding options, Turkey’s first sovereign wealth fund, the “Turkish Wealth Fund,” was created in 2016. The Turkish Wealth Fund is a financial vehicle to utilize public assets to support large-scale public funding needs, to finance infrastructure projects and to raise capital to stabilize capital markets. The fund, which is 100 percent owned and managed by the Turkish government, contains assets previously owned by the Treasury, including stake in BOTAŞ, Borsa Istanbul, TPAO, Turkish Airlines, Türk Telekom, horse racing licenses and certain real property assets.