The Law Amending Certain Laws numbered 7297 ("Law Numbered 7297"), published in the Official Gazette numbered 31429 and dated 20 March 2021, added a new provisional article to the Law on Making Certain Investments and Services within the Framework of the Build-Operate-Transfer Model numbered 3996 ("Law Numbered 3996") regarding debt assumption agreements to be concluded within the scope of build-operate-transfer projects.
With Provisional Article 4 of Law No. 3996, the Ministry of Transportation and Infrastructure ("Ministry") has been granted the opportunity to become a party to debt assumption agreements that will be executed by a public administration with a special budget affiliated with the Ministry (e.g., the General Directorate of Highways and General Directorate of State Airports Authority) in a manner that ensures fulfillment of the relevant administration's obligations arising from the debt assumption agreement for build-operate-transfer projects. Having said that the requirements sought for the projects for which the Ministry can become a party to the debt assumption agreements are as follows:
(i) The tender should have been held after 15 March 2020,
(ii) The implementation agreement has not been signed as of 20 March 2021, when Provisional Article 4 entered into force, and
(iii) The contemplated financing should include loans extended from abroad.
Above stated debt assumption agreements will also be exempt from the provisions of Article 4 and Article 8/A of the Law on the Regulation of Public Finance and Debt Management No. 4749 which stipulate an upper limit for debt assumption, regulate the requirement to obtain the opinion of the Undersecretariat of Treasury regarding the scope of the debt assumption agreement, and impose an obligation to comply with the tender legislation.
In the preamble of the new regulation, it is stated that due to the Covid-19 pandemic, foreign banks and financial institutions that will finance build-operate-transfer projects have concerns that the revenues of administrations with special budgets will not be able to cover their expenses, so the appointed companies to be assigned by the competent authority may encounter problems with obtaining financing. In this context, with the new regulation allowing the Ministry to become a party to debt assumption agreements, it has been anticipated that the project financing will be facilitated by the administrations in charge of build-operate-transfer projects (e.g., the General Directorate of Highways and General Directorate of State Airports Authority), which are among the administrations with special budgets affiliated to the Ministry and who do not have the opportunity to benefit from debt assumption of the Ministry of Treasury and Finance.