Recent developments

The Turkish Privatization Authority plans to re-launch its tender to privatize highways and bridges in the first quarter of 2015. The Privatization Authority has initiated a tender to select its advisors for the process and invited potential advisors to submit proposals by November 25, 2014. The tender for advisors is expected to be finalized in early December.

Renewed Highways and Bridges tender

Compared to the former tender, the renewed "Highways and Bridges" tender will include the following incentives, among others,to attract bidders:

  • No longer a concession; now a private law contract

Most importantly, under a February amendment[1] to the Highways Law[2], Turkish private law will govern the tender, rather than concession rules. As a result, regular Turkish courts, and not the Council of State, will have jurisdiction over the tender. This is expected to give the Privatization Authority greater flexibility to negotiate agreements. The negotiation stage before bid submission will, therefore, be crucial. 

  • Privatization method

The method of "transferring operational rights" through a concession has now been extended to include all methods in thePrivatization Law, except for transfer of ownership. The Privatization Authority may now sell shares of the company that will hold the highway operating rights and paves the way for public offerings. The method of privatization is expected to be set by the authority in close cooperation with their selected advisors following a comprehensive study prior to the start of the tender process.

  • Negotiable toll amount

With the February amendment to the Highways Law, use of the General Directorate of Highways' toll schedule is no longer mandatory for privatizations, enabling tolls to be set by agreement during privatization. Further clarification as to the amount of tolls is expected in the tender specifications.

Background

The Privatization High Council included highways and bridges in its privatization program on October 15, 2010. In the subsequent tender, a consortium of Koç Holding, UEM Group Berhad and Gözde Venture Capital submitted the highest bid -- USD 5.72 billion. The High Council nevertheless cancelled the tender as the bid was less than the minimum set by the Privatization Authority, reportedly USD 7 billion.

Conclusion

The Turkish Government and the Privatization Authority appear determined to hold out for a higher bid for the renewed "Highways and Bridges" tender, emphasizing that the revenue from these assets already justifies the price. The Turkish government and the Privatization Authority are eagerly waiting to gauge foreign and domestic investors' response to Turkey's new privatization move.